Virgin Atlantic flying high as profits double

Virgin Atlantic has stuck two fingers up at BA by doubling profits and boosting its premium business.

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Last Updated: 31 Aug 2010

This last 12 months have supposedly been the worst ever for the aviation industry, but Virgin Atlantic appears to have come out of it remarkably well: Sir Richard Branson’s carrier said today that annual pre-tax profits almost doubled to £68.4m last year. And even more surprisingly, the increased profits are partly down to more people taking advantage of its premium services – at a time when other airlines have been reporting a big decline in business-class passengers. So particularly for arch-rival BA, which last week was forced to report a £400m loss, today’s news will go down like a lead balloon…

Virgin certainly seems to have done a much better job than BA of managing its fuel costs – whereas BA clocked up a bill of nearly £3bn, thanks largely to a disastrous hedging strategy, Virgin did its sums better and spent less than £1bn (once currency benefits were factored in). As 5.8m people flew on its planes last year, group sales were up over 8% to £2.6bn, with profits rising from £35m to £68m. Great news for its 8,500 staff, who get to share out 10% of this as a bonus pot.

Even more impressively, Virgin also said today that it was winning market share from competitors at the premium end of the spectrum – all-important for airlines because the profit margins are so much higher. And given that BA saw a 13% drop in business-class travel last year, it’s clear to see where some of these passengers are coming from. This will be music to the golden-locked ears of Virgin boss Sir Richard Branson, who likes nothing better than getting one over on the blue-blooded BA.

Speaking of which, Virgin took the opportunity to have another pop at BA over its proposed merger with American Airlines and Iberia, which is currently awaiting Presidential approval in the US. Branson says it will hurt competition on transatlantic routes, and expressed his hope today that the US government ‘will put the interests of consumers first rather than bow to the influence of the big-spending airline, with strong political connections.’ We’re sure President Obama can’t fail to be swayed by this slightly cack-handed guilt trip.

CEO Steve Ridgway isn’t getting carried away; he says this next year will be much tougher, and warned that Virgin will need to chop costs and keep a beady eye on its cash position to stay ahead of the game. But we’d certainly rather be in his chair (or should that be his Upper Class flat bed?) than that of BA counterpart Willie Walsh at the moment, judging by today’s results.



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