Virgin Atlantic Sees Return to Profit Aided by Delta Air Ties -- Update

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."

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