Sir Richard Branson's airline Virgin Atlantic almost doubled its profits last year despite the carnage in so much of the global aviation industry.
The company yesterday reported pre-tax profits of £68.4m for the year to February, compared with £34.8m in the previous 12 months. Revenues, including Virgin Holidays, grew by 8.4 per cent to £2.5bn. Some 10 per cent of the profits will be shared out among the company's 8,500 staff.
The strong performance was helped by rising sales of first and business-class seats. Load factors – a favourite industry index calculated as a ratio between passenger miles flown and seat miles available – also remained strong thanks to rigorous price-cutting. Overall, a total of 5.77 million people flew with Virgin Atlantic last year.
Steve Ridgway, the chief executive, said yesterday: "We are winning market share from our competitors during the toughest trading environment ever. Our load factors remain resilient as travellers take advantage of these bargain fares, proving the value of vigorous competition." Few airlines can boast of rising profits as recession hits both business and consumer spending and rocketing oil prices sent aviation fuel bills to unprecedented highs. More than 30 carriers have gone bankrupt since the oil price started to take off at the start of 2008.
Even the big players are struggling. Virgin Atlantic's arch-rival, British Airways (BA), is having a torrid time. Last week, the flag carrier reported its worst losses since privatisation in 1987, with a £401m pre-tax loss for the year to March. The company's fuel bill went up by £1bn to £3bn and the fall of sterling against the dollar took another £180m off its bottom line. But the biggest problem was the slump in business and first-class travel: sales of BA's premium seats fell by 15 per cent in first eight weeks of the new financial year.
BA is by no means unique in its difficulties. This month has also seen Air France-KLM announce plans to cut 3,000 jobs, on top of the 2,700 slashed last year. The Spanish flag carrier, Iberia, also unveiled a €147m (£129m) loss and scrapped its dividend.
Not only is Virgin reporting strong sales of premium seats but it has also claimed a victory from its hedging strategy. Buying fuel two years in advance insulated the company from the worst excesses of oil price rises, adding a relatively modest £300m to take last year's total fuel bill to £1bn. By selling off much of the hedge book since then, the group also hopes to avoid being hit by the subsequent falls. Sir Richard, the president of the company, said: "The last financial year has proven to be the most volatile yet in our 25-year history. To increase profits against a backdrop of such a severe recession is an excellent achievement."
Virgin's numbers were applauded by industry experts. But unlike many of its competitors, Virgin Atlantic is not listed, and is therefore neither subject to the same level of scrutiny nor required to publish detailed financial information.
Howard Wheeldon, a senior strategist at BGC Partners, said: "Having doubled profits in the short space of a year, and in what was perhaps the most difficult year for all airlines since 2001-2, deserves significant praise. Sadly, this being a private as opposed to a public company, no further details have been made available and we are left to scratch our heads wondering about the state of Virgin Atlantic balance sheet and borrowings."
Sir Richard owns 51 per cent of Virgin Atlantic and the other 49 per cent is held by Singapore Airlines.