Underlying profit before tax rises A$18 mln in Q1 Financial...

• Underlying profit before tax rises A$18 mln in Q1
• Financial performance forecast to improve in Q2, Q3
• No conclusion to board talks of privatisation: chairwoman

(Adds outlook, analyst comment, closing share price)

Virgin Australia Holdings Ltd (VAH) said on Wednesday it was considering going private as it swung to profitability in the first quarter from a loss a year ago and forecast a continued improvement in the second and third quarter.

Australia's second-biggest airline is about 90 percent-owned by Singapore Airlines Ltd , Etihad Airways, Virgin Group, HNA Aviation and China's Nanshan Group, all of which have representatives on the board.

Privatising the carrier, the primary domestic competitor to Qantas Airways (QAN), would allow minority shareholders to cash out and could lead to less public scrutiny of its financial performance, which has been much weaker than its rival as it invested heavily to attract business travellers.

"The board has held discussions about privatisation, however there is no outcome to report to the market at this stage," Chairwoman Elizabeth Bryan said at the company's annual general meeting.

Virgin shares closed as much as 12.8 percent at the highest level since February, while the broader market (xjo) was flat.

"For minority shareholders, they are better off with the privatisation as public equity investor interest in Virgin has dwindled given the diminished level of detailed information disclosure by Virgin and stock trading liquidity in recent years," said Corrine Png, CEO of transport research firm Crucial Perspective.

Privatising the company would involve the existing shareholders topping up their stakes on market or the company launching a share buyback, said a source familiar with the situation who was not authorised to speak publicly about the matter.

A Virgin spokeswoman declined to comment. Singapore Airlines CEO Goh Choon Phong told media and analysts in Singapore his airline would not decide whether to support a privatisation until it had received a firm proposal.

A Virgin Group spokesman declined to comment, while Etihad, HNA and Nanshan were not available for immediate comment.

In a trading update on Wednesday, Virgin said underlying profit before tax in the three months to Sept. 30 had "improved" by about A$18 million ($14 million) from an underlying loss of A$3.6 million a year ago.

It did not provide a net profit figure for the quarter and has stopped releasing quarterly earnings updates.

Unit revenue for its domestic business rose by over 8 percent on the prior corresponding quarter.

The company said it expected its underlying performance for the second and third quarters of the financial year to continue to improve relative to the same period last year.

The carrier in August said a surge in business confidence had driven up corporate traffic. ($1 = 1.3068 Australian dollars)