Fuel prices and taxes push Virgin Atlantic into loss

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SOARING fuel costs and rising taxes took their toll on Virgin Atlantic yesterday as the airline slumped to an underlying loss of £80.2m.

The group founded by Sir Richard Branson said passenger numbers grew two per cent to 5.4 million in the year to February despite “an incredibly difficult market”, after it was boosted by a new route between Manchester and Las Vegas and more frequent flights to the Caribbean.

But the long-haul specialist was pushed into a loss, compared to a profit of £18.5m the previous year, as it struggled to pass on “sky high” fuel prices, which rose an average of 32 per cent in the year.

This was made more difficult by rises in air passenger duty – a so-called green tax on aviation – which further pushed up the cost of flying. Virgin said its fees through the duty rose 25 per cent to £195m in the year.

It is believed to be only the third time in the airline’s 28-year history that it has slipped into the red, the last being two years ago when it was hit by the financial crisis.

The Crawley-based group, which is 51 owned by Virgin Group with the rest owned by Singapore Airlines, said it will shave £50m from its costs, although it said this is not expected to impact on its 8,500 staff.

The first of six new Airbus A330s is due for delivery in coming weeks, which will help it deal with rising fuel costs because the planes are about 15 per cent more efficient than those they replace.

Chief executive Steve Ridgway said: “In an incredibly challenging market, we have managed to grow top line revenues and fly more customers than last year.

“However, with the prevailing uncertainty in the economy, sky high fuel prices and a 25 per cent hike in our air passenger duty fees, converting this sales growth into profit has not been possible.

“Despite this backdrop there can be no let up so to keep Virgin Atlantic at the forefront of airline customer innovation we have announced our biggest ever service and cabin investment programme.”

In February, Virgin Atlantic announced that it is spending a record £100m improving its Upper Class service as it targets business travellers and the wealthy.

This includes a newly designed seat and bar in its cabins and a new menu.

Its new financial year has got off to an “encouraging” start, with passenger numbers up 2.3 per cent to 1.3 million in its first quarter.