Virgin Atlantic has reported an increase in annual losses despite a rise in revenue in the year to February.

The carrier lost £93 million, up from £80 million a year earlier. However Virgin Atlantic’s group pre-tax loss was lower at just under £70 million thanks to a one-off exceptional item and a profit at Virgin Holidays.

The airline blamed rising costs and tough economic conditions for the losses, but announced a 5% increase in annual revenue to £2.87 billion.

Passenger numbers rose year on year by 188,000 to 5.5 million.

Airline chief executive Craig Kreeger said: “Last year saw a double dip recession, a continued weak macro economy, and an Olympic Games which . . . severely dented demand for business travel.”

Kreeger, who took over running Virgin Atlantic in February, has pledged the airline will turn a profit in two years. 

He reported a 9.2% rise in premium economy and Upper Class passengers year on year, coupled with an overall rise in load factors.

Virgin Atlantic is now 49% owned by US carrier Delta Airlines, which bought out Singapore Airlines’ long-held stake in December.

Kreeger said: “Virgin Atlantic has a programme of measures which I’m confident will improve our financial performance considerably and put us firmly on the road to a return to profit in spring 2015.”

The carrier launched its first short-haul and domestic services in March, with new brand Little Red operating a series of shuttle services between Heathrow and Manchester, Edinburgh and Aberdeen.

Kreeger said: “This marks a step change in Virgin Atlantic’s business model.

“Already, 27% of Little Red passengers are connecting onwards with Virgin Atlantic at Heathrow. This will be a significant revenue generator for the business.”

He added: “The alignment with Delta will give Virgin Atlantic passengers greater connectivity throughout North America meaning a more attractive offering and will greatly enhance Virgin’s sales base and revenue opportunities across the US.”

Kreeger insisted: “The enduring strength of the Virgin Atlantic brand has not wavered.”

He reported a 6% year-on-year increase in sales at Virgin Holidays and said: “Virgin Holidays continues to be the UK’s preferred choice in long-haul trips worldwide.”