Virgin Blue, Australia's second-biggest airline, said on Tuesday it will raise fares because of surging fuel prices, following a similar move by larger rival Qantas Airways.

The airline said domestic fares will rise by between AUD$5 (USD$4.70) and AUD$10 one way, while international fares will rise between AUD$5 and AUD$15.

Two weeks ago, Virgin more than halved its profit outlook for this year, citing surging fuel costs and increased competition.

Virgin said at the time that continuing to absorb excessive fuel costs was untenable if fuel prices remained at the then level of USD$135 a barrel. Jet fuel has since risen to USD$144 a barrel.

Oil futures hit a record just short of USD$120 a barrel on Monday on supply fears and tensions between the United States and Iran.

Qantas said on Monday it would raise its fares by 3.0-3.5 percent to help combat rising fuel prices.

Virgin's new fares will come into effect from May 6.

Virgin Blue shares fell 1.1 percent on Tuesday to AUD$0.84. They slid 18 percent on April 14 after the profit downgrade.