By Robert Wall
Virgin Atlantic Airways Ltd. expects to deliver a profit in 2014
after three successive years of losses as the airline founded by
billionaire Richard Branson starts to reap the benefits of a
trans-Atlantic alliance with Delta Air Lines Inc.
Virgin Atlantic cut its full-year pre-tax loss 50% to GBP51
million ($86 million) for the year ended in December that saw Delta
take a 49% stake in the Crawley, England-based airline. "The result
is on track with where we needed to get to in order to be confident
that 2014 will be profitable," said Craig Kreeger, who took over as
chief executive 14 months ago.
Kreeger set a two-year turnaround plan for Virgin Atlantic aimed
at cutting internal costs, boosting sales including through the
alignment with Delta, and rebuilding the airline's image as being
more edgy than rival carriers. The relationship with Delta allows
Virgin to offer a larger network and broadens its sales prospect in
the U.S.
A code-share agreement with Delta helped bolster sales in 2013
that saw passenger revenue rise GBP153 million. A further boost is
being felt this year as the deeper partnership takes hold that
allows the two carriers to more closely align operations. "We are
seeing significant joint venture benefits now," Mr. Kreeger
said.
Cost control has also been a focus with 51 separate initiatives
being pursued. The airline's fuel bill has also benefitted from a
fleet renewal that has seen the introduction of Airbus Group NV
A330 widebodies completed last year, yielding a 6% reduction in
per-flight fuel use. A further reduction in cost will come starting
in September when Virgin begins phasing in 16 Boeing Co. 787-9
Dreamliner wide-body planes to replace less-efficient four-engine
Airbus long-range jets. The next 12 months should see the first
five 787s handed over.
Virgin may exercise some options for additional Dreamliners in
the near term, Mr. Kreeger said. A decision on the eventual
replacement of all its Airbus A340s and Boeing 747-400 jumbos isn't
imminent. Mr. Kreeger has said previously Virgin may not take the
Airbus A380 superjumbos on order and may look at Boeing 787 and 777
long-range jets or the Airbus A350 instead.
The carrier's financial performance this year should also
benefit from an improvement in Little Red, Virgin Atlantic's small
short-haul service operated through an outsourcing deal with
Ireland's Aer Lingus. Making the carrier profitable has taken
longer than planned, but Mr. Kreeger said bookings have jumped and
he's "comfortable with where it is going."
Write to Robert Wall at robert.wall@wsj.com
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