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At its inception in 2000, Virgin Blue did not have interline or marketing alliances with other airlines.However, after the collapse of its domestic competitor Ansett Australia, it began a codeshare agreement with United Airlines.

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Now based in Bowen Hills, Brisbane, the airline was co-founded by British businessman Richard Branson, the founder of parent Virgin Group and former Virgin Blue CEO Brett Godfrey.Delays in negotiating access to the former Ansett terminal at Sydney Airport however, forced Virgin to use its original terminal there—a collection of prefabricated buildings without aerobridges—longer than was needed.As the airline grew, it acquired new equipment, enabling it to phase-out its older 737-400s in favour of 737-700 and -800 series aircraft with modern glass cockpits, winglets and greater fuel efficiency.The Virgin Blue name was the result of an open competition; it was a play on the predominantly red livery and the Australian slang tradition of calling a red-headed male 'Blue' or 'Bluey'.The timing of Virgin Blue's entry into the Australian market was fortunate as it was able to fill the vacuum created by the failure of Ansett Australia in September 2001.It was established in November 1999 with two aircraft operating on a single route, and suddenly found itself catapulted to the position of Australia's second airline after the collapse of Ansett Australia in September 2001.

The airline has grown to directly serve 29 cities in Australia from hubs in Brisbane, Melbourne and Sydney, using a fleet of narrow-body Boeing and Embraer jets; and Airbus and Boeing widebody jets.

Ansett's failure allowed Virgin to grow rapidly to become Australia's second domestic carrier, rather than staying just a cut-price alternative to the established players.

It also gave Virgin access to terminal space without which growth would have been significantly limited.

Patrick had been unhappy for some time with the company's direction.

By the closure of the offer, Patrick held 62% of the company, giving it control. In May 2006 Toll Holdings acquired Patrick and became the majority owner of Virgin Blue.

Virgin Blue previously used a familiar formula pioneered by airlines such as Southwest Airlines and Ryanair of eliminating costs such as included in-flight meals and printed tickets in favour of selling food on-board and using telephone and internet booking systems.