Virgin Atlantic narrows loss, sees return to profit next year

Virgin Atlantic Airways Ltd. narrowed its full-year loss and said the shortfall will shrink further in 2022 as coronavirus concerns fade and travel to the U.S. picks up.

The U.K. long-haul specialist doesn’t expect to make a profit until next year, with connections to East Asia still closed. The Covid-19 crisis almost tipped Virgin Atlantic into collapse in 2020, and it’s needed fresh funding from founder Richard Branson as recently as December. 

The statutory loss for 2021 narrowed 44% to 486 million pounds ($638 million), Virgin Atlantic said Tuesday. Sales rose but remained at one-third of pre-crisis levels, with the cargo business producing more revenue than passenger operations.

Travel demand is now expected to return “at scale” after the omicron variant of Covid-19 delayed an earlier rebound, Chief Executive Officer Shai Weiss said in a statement. 2022 is set to be “a year of transition from survival to recovery and on to profitability by 2023,” he said.

At the height of the pandemic, Virgin Atlantic underwent a court-supervised restructuring, saved by a 1.2 billion-pound rescue from lenders backed by owners Branson and Delta Air Lines Inc. It required a further 400 million pounds from the shareholders in December to see it through the omicron outbreak, after putting off plans for an initial public offering.

Chief Financial Officer Oliver Byers said in an interview that he expects Virgin Atlantic to enjoy several weeks and months of positive earnings this summer before attaining sustained profitability next year. “We’ll make a profit in ‘23,” he said.

Capacity Boost

The airline operated 90% of the number of pre-Covid flights in the first quarter, and that will increase to 100% by the summer, Byers said. Seat capacity will still be down after the airline withdrew its largest Boeing Co. 747 jets.

Demand on the company’s core U.S. routes is rebounding fast, with very strong bookings for the Easter travel period, the CFO said. For the summer, while there’s still a “compressed booking curve,” sales are building and planes should be flying reasonably full, he said. 

Virgin isn’t yet operating to East Asia due to border curbs and the expense of flying around Russian airspace, but the U.S. market is proving strong enough to absorb freed-up jets, with the company set to launch its first flights to Austin, Texas, in May.

Business Travel

Bookings are being spurred by pent-up demand for visits to friends and family delayed by the pandemic, as well as a buoyant market for long-haul leisure trips. Even so, corporate travel is beginning to return and has reached 70% of pre-coronavirus levels on some U.S. routes.

Crawley, England-based Virgin, which is 51% controlled by Branson, ended last year with 580 million pounds in cash. It currently has in excess of the 420 million pounds of reserves it held at this time of the year in 2019, and Byers said there’s unlikely to be any further call for funding this year.

While higher fuel prices are raising costs, Virgin has been able to increase fares on some routes in the past few weeks, Byers said.

Weiss said last month that the airline had moved to protect against higher oil prices for 50% of its fuel requirements, and would pass the rest on to customers.