Virgin Atlantic increases profit but warns of losses in 2017

Virgin Atlantic increases profit but warns of losses in 2017

Virgin Atlantic Group has reported a £23 million profit after tax and total overall group revenue of £2.69 billion.

Profit for the year up to the end of December 2016 was £0.5 million up on the previous year and the firm says a “major contributing factor” was the performance of Virgin Holidays.

Operating costs for the group reduced £225 million, driven by fuel cost reductions of £191 million

And despite hedging losses of £179 million, Virgin Atlantic Group finished in a “strong” cash position of £526 million – in the second year of a three-year £300 million investment period.

The fall in the value of sterling after the UK’s Brexit referendum vote cost Virgin Atlantic £50 million and led to an “immediate” drop in passenger numbers.

Speaking to Travel Weekly on board Virgin Atlantic’s inaugural flight from Heathrow to Seattle, chief executive Craig Kreeger said he was pleased the company reported profits of £23 million in what he called a “difficult” year.

He also added that he forecasts 2017 to be a “money losing year”.

“We try not to confuse the drop in the value of the pound with Brexit,” he said. “Of which the exact implications we don’t know.

“We performed very well in 2016, on the things that we can control. It’s been a very good year in difficult circumstances.”

Passengers numbers from the UK dropped “immediately” after the referendum on Britain’s membership of the European Union, he added, but said the number of Brits flying to America since the Brexit vote, and President Trump winning the US election, has since been “better than expected”.

Kreeger added that there was no data among the firm to indicate a ‘Trump slump’. “We went into January with some trepidation,” he said. “But we’ve had a very strong booking start to the year.”

He said what had been noticed was that Brits were making budgetary adjustments, such as slightly shorter stays or slightly lower quality hotels, but the British tradition of a summer holiday is “sacrosanct”.

And Kreeger also said there was an “opportunity” for Virgin Atlantic to capitalise on Americans flying to “bargain” Britain.  “It’s a great time to come,” he said.

Despite gloomy forecasts for 2017, Kreeger remained optimistic, adding: “We are well positioned to work our way through that [a money losing year] because of the money we have invested and the profits we’ve made for the last three years.”

Virgin Atlantic took delivery of four new Boeing 787-9s and placed an order for 12 Airbus A350-1000s and recorded its best ever customer satisfaction scores.

It total, 5,436,000 passengers flew on 22,000 direct Virgin Atlantic flights and the group said its arrival and departure performance targets were beaten.

Virgin Atlantic chief executive Craig Kreeger said: “This was a year in which we faced significant external headwinds, so improving our profit and growing our market share in this challenging environment is testament to the hard work of our teams.”

 

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