Virgin Atlantic Airways Ltd., the long-haul carrier controlled by billionaire Richard Branson, is having a “very challenging year” as demand for air travel slumps, according to its chief executive officer.
“It’s not about making a profit this year, it’s about making sure we protect our cash,” CEO Steve Ridgway said today in an interview. “Fares and yields are at all-time lows and the premium market has shrunk dramatically.”
Virgin Atlantic has trimmed capacity by about 7 percent by eliminating some flights to destinations including New York, and probably will reduce seating further this year, Ridgway said. The carrier is 49 percent owned by Singapore Airlines Ltd.
The Crawley, England-based carrier doubled pretax profit last year as it carried more premium passengers, bucking a trend of net losses at competitors including British Airways Plc and Air France-KLM Group. Virgin is unlikely to repeat that feat.
Ridgway called on the European Union to extend the suspension of a rule that requires airlines to use takeoff and landing slots at least 80 percent of the time, or face losing them the next year. The European Parliament has put the requirement on hold until Oct. 24.
“The important thing is that this happens during the winter,” Ridgway said. “The industry needs to balance capacity to the demand that is out there.”
Virgin also wants the U.S. to deny British Airways antitrust immunity for a proposed alliance with AMR Corp.’s American Airlines. Branson has argued for years that increased ties between the two carriers would stifle competition, particularly on trans-Atlantic routes.
Virgin’s pretax profit rose to 68.4 million pounds ($108 million) in the year ended Feb. 28 from 34.8 million pounds a year earlier, Virgin said today in a statement. Passenger numbers increased 1.2 percent to 5.77 million in the calendar year.
The carrier’s earnings may already be slowing. Singapore Airlines Chief Executive Officer Chew Choon Seng said May 14 that Virgin is “underperforming.” Singapore’s senior vice president for finance, Chan Hon Chew, said the next day that the $106 million of “associate losses” the airline reported for the quarter ended March 31 were “largely coming” from its investment in the U.K. carrier. Virgin doesn’t report a net income figure.
British Airways reported its first full-year loss since 2002 on May 22, as demand plunged and fuel costs rose. The pretax deficit in the period ended March 31 was 401 million pounds. Air France said May 19 that it will deepen job cuts after logging its first loss since 1996.
Airlines worldwide will likely lose a combined $4.7 billion this year, the International Air Transport Association said March 24.