Virgin Atlantic reported a £28.4 million pre-tax loss for 2017, a £51-million reverse on 2016 when the UK long-haul carrier recorded a £23 million profit.
Craig Kreeger, Virgin Atlantic chief executive, attributed the reversal to sterling’s depreciation against the dollar, an industry-wide problem in accessing Rolls Royce engine parts for the airline’s Boeing 787 fleet, and severe Hurricane disruption in the Caribbean last autumn.
The carrier reported a 1% fall in annual revenue to £2.7 billion, a 2.2% reduction in capacity year on year and a small decline in passenger numbers to 5.3 million – down from 5.4 million in 2016.
Virgin Atlantic had previously reported three consecutive years of profits totalling £56 million, following substantial losses in 2012 and 2013.
Kreeger said: “There were three big external issues we had to deal with.” However, he said: “We expected 2017 to be loss-making – £28.4 million was well ahead of our expectations despite the considerable operational challenges.”
Virgin Atlantic’s tour operator brand Virgin Holidays saw a 1.5% increase in passenger numbers year on year to 397,000 and a pre-tax profit of £15.5 million.
Kreeger declined to offer guidance on the carrier’s performance in 2018, saying: “We expect a continuation of the challenging macro-economic environment in the UK as we head toward Brexit, with domestic inflation at a five-year high.”
But he insisted: “We are very well-positioned. We expect growth [in passengers] of roughly 9% between today and 2021.”
The carrier is due to take delivery of the first of 12 Airbus A350 aircraft next year and will have replaced its entire fleet over 10 years by the end of 2021.
Chief financial officer Tom McKay noted: “At points we had 10% of our fleet grounded [in 2017]. But this is not a Virgin Atlantic issue, it is specific to the 787 and the availability of parts for the engines. We were short of engines, as were our competitors. It is about the availability of spares.”
He said the fall in the pound against the dollar also had a significant impact as “two-thirds of our cost base is in dollars”.
McKay added: “There were significant capacity increases on the North Atlantic, with fuel cost reductions passed on to customers, [leading to] continuing softness in revenues particularly in the UK.”
He said: “The external environment continues to be challenging.” However, McKay noted 2018 would mark “a milestone in the modernisation” of the airline’s fleet.
Virgin Atlantic is 49% owned by Delta Air Lines, with which it operates a transatlantic joint venture (JV).
Air France-KLM is poised to take a 31% stake in the UK carrier, pending regulatory approval expected next year, leading to a second transatlantic JV.
Kreeger dismissed reports that a US-UK open skies deal, required to maintain flights between the countries when Britain leaves the EU, could be in jeopardy.
He said: “I don’t think it is an issue the US-UK will struggle with. But we would like to see it resolved quickly. The sooner we don’t see media and consumer questions about it, the better.”