UPDATE 1-Australia's Virgin Blue scraps div, profit tumbles

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SYDNEY, Aug 19 (Reuters) - Virgin Blue Holdings Ltd (VBA.AX), Australia's second-biggest airline, reported a 55 percent fall in 2008 profit on high fuel prices on Tuesday, cut its dividend and painted a gloomy outlook, sending its shares tumbling 15 percent.

Virgin, a quarter owned by British entrepreneur Richard Branson, suggested it expected an even more challenging year ahead, despite recent falls in the crude oil price.

"The operating environment during the next 12 months is expected to be the most challenging the Virgin Blue group...has experienced to date," the company said.

"In light of the current economic environment and the outlook for the aviation industry, there will be no final dividend payment for the 2008 year," it said, adding that dividends for the current fiscal year would be considered "in the context of industry conditions prevailing at the time".

Virgin's earnings come two days ahead of bigger rival Qantas Airways Ltd (QAN.AX), which forecasts 40 percent profit growth.

Airlines around the world have been cutting capacity, scrapping growth plans to battle soaring fuel costs, with the International Air Transport Association forecasting a $6.1 billion loss for the industry worldwide.

Virgin said net profit totalled A$97.7 million ($85 million) for the year ended June 30. It skipped its final dividend, halving the full-year payout to just 2 cents per share.

Virgin shares, which had been down over 8 percent before the earnings announcement, extended losses to as much as 15 percent after the news and were last down 13.3 percent at A$1.01.

In April, Virgin forecast net profit would more than halve to around A$100 million. It has cut capacity to battle high oil prices.

Last month, Virgin's biggest shareholder transport group Toll Holdings Ltd (TOL.AX) sold its 63 percent stake in Virgin, which stoked speculation that Virgin could become a takeover candidate. ($1=A$1.15) (Reporting by Denny Thomas, Editing by Mark Bendeich)