Virgin Atlantic Ltd has released its annual financial results for the year ended 31 December 2017 – reporting a pre-tax loss of £28.4 million before tax and exceptional items.
Despite a challenging macro-economic environment and operational challenges, Virgin Atlantic Group sustained its focus on delivering an unrivalled customer service, whilst maintaining rigorous cost control. Virgin Atlantic took decisive action in light of the continued weakness of Sterling to increase inbound traffic to the UK – achieving a 20% increase in US-based passengers, and double-digit unit revenue growth on rest-of-world routes.
Virgin Atlantic achieved the highest customer satisfaction scores for transatlantic flights (IATA Airstat 2017) and alongside its transatlantic joint venture partner Delta Air Lines operated the most punctual flying schedule between the US and London Heathrow.
Virgin Holidays reported a profit of £15.5 million before tax and exceptional items and a 1.5% increase in customers year-on-year.
Virgin Atlantic Cargo revenues grew by 9.3% to £199.3million and cargo tonnage increased by 5.8% year-on-year.
Virgin Atlantic Group 2017 performance at a glance1:
- Loss before tax and exceptional items for the year to December 31, 2017 of £28.4 million (2016: £23 million profit)
- Virgin Holidays achieved profit before tax and exceptional items of £15.5million (2016: £19.1 million profit)
- Total Group revenue of £2.7 billion (down 1.0% year-on-year)
- Virgin Atlantic Cargo revenues grew by 9.3% to £199.3 million and cargo tonnage increased by 5.8% year on year
- Airline operating costs before exceptional items have reduced by £103.5 million year-on-year
- Airline unit operating cost improved by 2.9% year-on-year
- Non-fuel unit costs increased by 2.2% year-on-year, driven by 2.2% less capacity
- Fuel unit costs before exceptional items for the year were down 15.7% driven primarily by improved fleet efficiency and further unwinding of hedging losses
- Strong passenger load factor of 78.3% (-0.4pts year-on-year) despite significant capacity increases across the Atlantic
- Virgin Atlantic continues to have a strong total cash position of £494 million
- £32 million cash inflow from a successful upsizing of our senior secured note financing transaction used to make pre-delivery payments for new A350s which will commence delivery in 2019
- 2.5% reduction in total aircraft CO2 emissions from its fleet, and a 1.8% reduction in its main efficiency measure of CO2/Revenue Tonne Kilometre
1Comparatives to 2016 with the exception of profit before tax and exceptional items (PBTEI) are made on a constant currency basis
- 5.3 million passengers flown in 2017, down 0.1 million year-on-year
- Virgin Holidays customers increased by 1.5% to 397,000
- Closer working with our transatlantic joint venture partner Delta Air Lines helped deliver a 20% increase in US-based customers on Virgin Atlantic flights
- Virgin Atlantic relocated its operations to the North terminal at London Gatwick – delivering a brand new Clubhouse, and improved check-in experience for customers
- Both Virgin Atlantic and Virgin Holidays increased their customer satisfaction scores by 5 points and 3 points respectively
- Together Virgin Atlantic and Delta Air Lines operated the number one on-time partnership between the US and London Heathrow – delivering the most punctual service for customers
- Virgin Holidays continued to invest in retail with a flagship v-room store in Cardiff, and the launch of 300 new ‘Experiences’ to help customers create bespoke holidays
- Virgin Atlantic Cargo saw volumes reach a five year high in 2017 driven by strong growth in pharmaceutical and e-commerce shipments
- Virgin Atlantic will introduce three new economy products in spring 2018 – economy delight, economy classic and economy light – offering customers more choice, and a lower price point
- Due to the industry-wide engine supply issue, Virgin Atlantic has leased three additional Airbus A330-200 to continue to provide a reliable service, and opportunities for future profitable
- Virgin Atlantic is working to conclude agreements and secure the necessary regulatory approvals for our planned expanded transatlantic joint venture with Delta Air Lines and Air France–KLM
- Virgin Holidays continues to innovate – launching Departure Beach in Barbados in summer 2018, and a brand new v-room store in Norwich in Q1
- Progressing the fleet modernisation programme by completing the delivery of its 17 Boeing
- 787-9 aircraft, and preparing for the first of 12 Airbus A350-1000 to join the fleet early 2019
- Introducing a second daily service to Johannesburg from winter 2018 following the successful
- growth of the South African service in 2017
- Investing in 22 automated bag drop kiosks across London Gatwick and London Heathrow – freeing up employees to provide a more personalised service
- Completing Virgin Atlantic's four year £300 million investment in customer experiencewhich has included becoming the first European carrier to be fully Wi-Fi enabled, and providing personal USB power at every seat
Craig Kreeger, Chief Executive, Virgin Atlantic said:
“We continued to deliver industry-leading service in 2017 despite significant operational challenges, and a difficult economic backdrop. By focusing on customers, and investing in our experience on the ground and in the air we achieved the highest customer satisfaction score of any transatlantic airline and attracted more customers to Virgin Holidays and Virgin Atlantic Cargo.
“There were three big external issues that we had to deal with in 2017; the full year impact of a weak Sterling relative to the Dollar, an industry-wide engine supply issue and severe Hurricane disruption in the Caribbean and US.
“While some of these challenges will remain prevalent in 2018, we will stay focused on delivering for our customers. We have just announced the biggest change to our Economy offer in a decade to introduce three new products from spring. Virgin Holidays will continue to innovate with the launch of the world’s first Departure Beach this summer and our cargo operations will continue to grow in the high value pharmaceuticals market through our new Pharma Zone at Heathrow.”
Tom Mackay, Chief Financial Officer, Virgin Atlantic said: “We’re pleased that the steps taken over recent years have put us in a strong position to face the economic and operational challenges of 2017. We have retained close control over our costs and continued to put the customer at the heart of our business by investing in their experience and protecting passengers from the impact of engine supply issues. By working closely with our transatlantic joint venture partners Delta Air Lines we moved swiftly to offset the weaker Sterling, and successfully drive more demand to the UK.
“The external environment will continue to be challenging in 2018, however we’re in a resilient position thanks to the addition of three A330-200 to our fleet in Q1, and the introduction of new economy products which will offer more choice for our customers. This year will be a milestone in our fleet modernisation programme as we complete our order for Boeing 787-9 aircraft, and prepare for the arrival of our Airbus A350-1000 aircraft from spring 2019 - helping to transform our fleet into one of the youngest, and most fuel-efficient in the sky.”