Wednesday, March 23, 2016

Virgin Atlantic Profit Rises on Lower Fuel Costs, Delta Tie-Up: Airline’s profit nearly doubled in 2015



The Wall Street Journal
By Robert Wall
Updated March 23, 2016 7:36 a.m. ET


LONDON--Virgin Atlantic Airways Ltd. chalked up a second year of operating profit last year after a succession of yearly losses, aided by a lower fuel bill and a restructuring in which the carrier founded by billionaire Richard Branson has focused on flights to the U.S.

Virgin Atlantic, 49%-owned by Delta Air Lines Inc., said on Wednesday that pretax profit, before so-called one-time items, nearly doubled to £22.5 million ($32 million) from £12.4 million in 2014 when the carrier ended a three-year run of losses.

The Crawley, England-based airline said the sharp decline in fuel costs drove a £198 million reduction in operating costs, excluding currency fluctuations, on revenue of £2.78 billion. The airline carried 5.9 million passengers last year.

Chief Financial Officer Shai Weiss said fuel costs should fall further this year as the airline’s fuel hedges unwind, which left the carrier paying more than spot rates in 2015. Airlines often hedge fuel consumption using financial instruments to have certainty over their costs.

“We achieved these improved results in a year in which we also transformed our business and network, laying the foundations for a robust and enduring Virgin Atlantic,” Chief Executive Craig Kreeger said.

The airline said shifting capacity to North Atlantic routes as part of its tie-up with Delta led to a 2.5 percentage point drop in average revenue passenger load factor to 76.8%. But the joint venture between the two carriers delivered a 55% increase in profit, with lmost 400,000 customers connecting between Virgin and Delta, Virgin said.

The U.K. carrier plans to introduce more Boeing Co. 787-9 Dreamliners to its fleet this year and modernize some Airbus Group SE A330 long-haul planes. Virgin Atlantic also plans to roll-out in-flight Wi-Fi as part of a previously announced £300 million investment.

Corrections & Amplifications

Virgin Atlantic, 49%-owned by Delta Air Lines Inc., said on Wednesday that pretax profit, before so-called one-time items, rose to £22.5 million ($32 million) from £12.4 million in 2014 when the carrier ended a three-year run of losses. A previous version of this article misstated Delta’s shareholding as 59% as well as Virgin Atlantic’s 2014 profit.

Original article can be found here:  http://www.wsj.com

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