Virgin Atlantic predicts losses amid impact of Brexit-hit pound
Airline giant Virgin Atlantic has warned it expects to nosedive into the red in 2017 with its first loss for four years as it grapples with the fall-out from the Brexit-hit pound.
Craig Kreeger, chief executive of the carrier backed by Sir Richard Branson, predicted the losses as he revealed a £50 million hit in 2016 from headwinds including the plunge in the pound since the Brexit vote and the impact on consumer confidence.
Despite this, Virgin Atlantic Group posted a 2% increase in underlying pre-tax earnings to £23 million for 2016, thanks in part to a 75% surge in profits at its Virgin Holidays tour operator business.
It marked its third year in a row of profits, but the group is expecting to bring the strong run to an end this year due largely to the pound's sharp falls since the EU referendum vote last June.
On unveiling the results, Mr Kreeger said the pound's fall was impacting sales while also increasing its costs.
The group is keeping a tight control on costs to help offset the currency woes and is also reviewing its flight network.
Virgin Atlantic chief financial officer Tom Mackay said: "A decline in both bookings and the rate of the pound following the EU referendum materially impacted our revenues, but through sensibly managing capacity and network, our load factors increased and we grew our UK point of sale market share on our routes. We were also disciplined on cost control."
He added: "We anticipate the challenges which emerged in 2016 around currency fluctuations, rising fuel prices and lower passenger revenues to continue, but we are well positioned to manage this."
The group flew 5.4 million passengers last year and improved its load factor - a key measure of how well airlines fill their planes - by 1.9 percentage points to 78.7%.
Its Virgin Holidays business was the star performer, delivering a £19.1 million pre-tax earnings haul for 2016 as passenger sales by volume rose by 4.9%.
Virgin Atlantic is now more than two-thirds of the way into a three-year, £300 million investment programme and said it remains committed to the plan, which is seeing it upgrade its fleet of planes.