Virgin Atlantic rises above fuel costs

SIR Richard Branson's Virgin Atlantic today reported its best profits performance since 1999, despite losing £60m to higher fuel costs.

Virgin reported pre-tax profits of £68m in a year when it was forced to slap a fuel surcharge on air fares after oil prices hit new highs. But the carrier headed off any criticism that the surcharge was a tool to boost profits, saying it only recovered one-third of the additional costs it faced during the year.

The surcharge was introduced exactly a year ago and has been raised in line with the rapid increase in oil prices. Virgin lifted the levy on a long-haul flight from £10 to £16 in March and key rivals such as British Airways have followed suit.

The profits figure for the year to 28 February compared with £20.9m for the previous 10 months, while turnover also rose from £1.27bn to £1.63bn.

It means more than 8,000 staff will receive an annual profit-related bonus for the third year in a row, although Virgin did not give details of the average payout.

Details emerged a fortnight after British Airways said around 35,000 staff in the UK were to get bonuses after annual profits reached £415 million - its highest since 1998.

Sir Richard said he was proud of the performance in a tough year when 'many leading players in the airline industry continued to struggle to survive' and the target of 10% annual growth in turnover remained unchanged.

High oil prices, overcapacity on Atlantic routes and slow economic recovery challenged airlines but Virgin Atlantic had countered this by the introduction of a new Upper Class suite.

This suite - which features the biggest flat bed in business class - helped attract new customers, with 4.4m people flying with Virgin Atlantic last year compared with 3.4m in the previous reporting period.

Despite the challenging operating environment, Virgin has continued to invest in its aircraft and launch flights to new destinations. It took on three new Airbus A340-600 aircraft to bring its total fleet to 31 and has placed an order for up to 26 more planes worth $5.5bn (£3.02bn).

The past year also saw Virgin add new routes to Mumbai, Havana and Nassau and the carrier plans to launch flights to Dubai and Montego Bay this year.

Tour operator - Virgin Holidays - lifted turnover to £407m from £314m, while the company said its cargo operations had also performed solidly.