Virgin Express said on Friday it cut its operating loss by 75 percent to EUR3.9 million (USD$5.05 million) last year despite lower revenues, as it kept costs under control, partly by reducing its fleet.

The discount airline, controlled by British business leader Richard Branson's Virgin group, said in a statement it planned to further reduce its fleet this year.

Virgin Express is in talks with full-fare peer SN Brussels Airlines to join forces to cut costs and strengthen their position in the face of fierce competition. The airlines, both based in Brussels, are to announce a final agreement on April 12.

Virgin Express said its operating loss narrowed to EUR3.9 million last year from EUR16 million (USD$20.7 million) in 2003.

Revenues fell 13 percent to EUR180 million (USD$233.2 million) due to the lower number of aircraft in its fleet.

The passenger load factor was 76 percent, in line with other discount airlines in Europe, it said.

The net loss narrowed by 63 percent to EUR7.3 million (USD$9.5 million).

Virgin Express said it had reduced the number of rotations on loss-making routes, closed its Bordeaux route, and cut its fleet to 11 from 13 planes. "A further reduction (is) planned for 2005," it said.

Earlier this month, SN Brussels, successor to Belgium's bankrupt flag carrier Sabena, posted a small net profit of EUR600,000.

The April 12 date for agreement on joining forces comes ahead of the June deadline the airlines have given themselves after signing a preliminary agreement last October.

The airlines account for nearly half the passenger traffic at Brussels Airport. They have been feeling the heat especially from Irish no-frills airline Ryanair, which has a hub in Charleroi, south of Brussels.

Under the terms of October's preliminary agreement, the airlines would combine their operations in a joint holding company but still operate as separate businesses.

Virgin Express Holdings, 88.6-percent owned by Branson's Virgin Sky Investments, would own 29.9 percent in the holding, while private investors in SN Brussels would hold the rest.

Virgin Express would delist its stock from Euronext Brussels and the Nasdaq in the United States.

The deal has been seen as a way for Branson to eventually pull out of Virgin Express altogether.