Australia's New South Wales taxpayers will reap a "profit" from Virgin Blue's decision to expand its operations in Sydney, NSW Premier Morris Iemma says.

The airline has announced it would locate a new training and maintenance facility at Sydney Airport, taking up an undisclosed incentive package agreed with the state government.

The AU$10 million investment is expected to generate 1,000 jobs and comes on top of the airline's decision to base its new international offshoot V Australia in Sydney, which also promises 1,000 new jobs.

Premier Morris Iemma said the incentive package for Virgin included payroll, marketing and training incentives.

"We make a profit because jobs that otherwise would not be here are coming here, and the company will pay payroll tax," Mr Iemma told reporters.

"That's a profit for the people of NSW."

The new facility will be home to a fleet of 20 new Virgin Blue jets, in a major expansion of the airline's domestic operations.

A site at nearby Botany will be used for the training of pilots and cabin crew.

Virgin Blue chief executive Brett Godfrey said the expansion, along with the rollout of V Australia, represented a direct investment of more than AU$60 million in NSW.

"If you consider the investment in infrastructure, particularly the Botany facility, I think ... comfortably in excess of that," Mr Godfrey said.

Mr Godfrey said the rollout of V Australia was on schedule, with the first flight due in December.

Photograph: Virgin Blue chief executive Brett Godfrey at the press conference held at Sydney Airport on Sep. 2. Photographer: Simon Li