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Virgin Atlantic profits shored-up by holidays division

UK operator Virgin Atlantic has slightly increased its full-year pre-tax profit to £23 million ($29 million) before exceptional items, despite a slip in revenues.

Virgin Atlantic, which has a partnership with Delta Air Lines, turned in group revenues of £2.69 billion, down 3.3%, while unit revenues declined by 4.3% at constant currency.

Chief executive Craig Kreeger says the company has faced “significant external headwinds”, including a 6% rise in transatlantic capacity and rising fuel prices.

But it is stressing that it achieved its third consecutive profitable year despite “challenging” economic conditions.

The company is attributing its success largely to a “significant” performance from its Virgin Holidays division, which recorded a 75% increase in pre-tax profit to £19 million. Virgin Holidays had changed its business model to direct-sales only.

Virgin Atlantic cut its operating costs as a result of reduced fuel expenditure – down by £191 million – although it acknowledged hedging losses of £179 million.

Chief financial officer Tom Mackay says the company’s revenues were “materially impacted” by a decline in bookings and weakness in the UK currency following the European Union membership referendum in June last year.

“But through sensibly managing capacity and network, our load factors increased and we grew our UK point of sale market share on our routes,” he says. “We were also disciplined on cost control.”

The airline transported 5.4 million passengers.

Passenger load factor for the company increased by nearly two points to 78.7% for the year.

But cargo revenues fell by nearly 16%, says the company, as a “modest” volume increase was offset by pricing pressures resulting from overcapacity and UK currency weaknesses. Yields were down by more than 17%.

Virgin Atlantic expects currency fluctuations and rising fuel costs to continue this year but says it is “well-positioned” to manage the situation.

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