Virgin Atlantic Ltd has released its annual financial results for the year ended 31st December 2018. The company, comprising Virgin Atlantic, Virgin Holidays and cargo, reported a pre-tax loss of £26.1 million before tax and exceptional items - significantly improved from the £49.0m loss in 2017.
Against a challenging economic backdrop, Virgin Atlantic Ltd increased overall revenue by £150m, a 5.8% year on year growth. Passenger numbers have grown by 4.8% to 5.4 million, with results displaying a passenger unit revenue (PRASK) increase of 1.7% - the first year of positive growth since 2014. These results put the company in a strong position to realise its plan to revive growth and return to profitability.
The company continued to focus on delivering unrivalled customer service, maintaining its number one IATA customer satisfaction ranking for transatlantic flights and operating its most punctual flying schedule between the US and London Heathrow since 1997.
Performance was impacted by the weakness of GBP versus USD, economic uncertainty and the continued shortage of Trent 1000 engines used on Boeing 787 aircraft.
Total revenue increased by £150m (5.8% year on year growth) to £2.8bn for the year, including an airline passenger unit revenue increase of 1.7%
Airline direct operating costs increased by £133m year on year, driven by higher fuel prices and 3.5% capacity growth
Non fuel unit costs improved by 1.2% year on year
Company loss before tax and exceptional items of £26.1m, significantly improved from a £49.0m loss in 2017
Strong cash position of £489m at year end and undrawn credit facility of £180m
Virgin Atlantic reached its highest on time arrival performance since 1997, was ranked number one for customer satisfaction by IATA, and voted Britain’s only Global Five Star Airline by APEX in the Official Airline Ratings. The airline achieved the highest sustainability ranking of any airline globally with an A- Leadership rating in the 2018 Carbon Disclosure Project performance assessment
Virgin Atlantic highlights
£150m incremental revenue growth (5.8% year on year growth) in 2018 driven by:
4.8% growth in passenger numbers to 5.4m
The successful launch of three new ways to fly economy resulting in an incremental contribution of £27m
Upper Class passenger unit revenue increased significantly by 10.2%, supported by our investment in refurbished cabins and an increased focus on attracting business travellers
Premium cabin passenger unit revenue also increased by 2.1%
Transatlantic routes operated in partnership with Delta continued to outperform expectations, with a 13.5% increase in US point of sale (US PoS now represents 31% of sales)
Codeshare revenue increased by 62%, driven by the strong performance of partnerships with airlines such as Virgin Australia and Flybe (Flybe growth doubled in 2018)
Virgin Holidays highlights:
Virgin Holidays made a profit before tax and exceptional items of £6m. This is a reduction year on year due to softer consumer demand, which has been caused by economic uncertainty and the weakness of GBP versus USD
22 new retail concession stores were opened in partnership with Next
Customer satisfaction reached record levels with continued investment to improve the customer experience, including the world’s first ‘Departure Beach’ which was successfully launched in Barbados in December 2018
Working closely with Virgin Atlantic, online bookings of ‘Flight+Hotel’ packages increased 250% year on year
Cargo achieved its strongest revenue performance in the last five years, as revenues grew 13% year on year to £222m
This record result was supported by a 6% annual growth in volume to more than 244,000 tonnes - the airline’s best result since 2010
Performance was underpinned by improvements in customer sentiment, achieving their highest ever NPS score of 40
Growth was achieved across the majority of commodities flown, with high value segments such as pharmaceuticals seeing a 50% year on year volume growth
Shai Weiss, CEO Virgin Atlantic said: “2018 saw us delivering safe, industry leading service and unrivalled customer experience, helping us to secure 4.8% growth in passenger numbers to 5.4m. We remained number one for customer satisfaction across the Atlantic, meanwhile Virgin Holidays increased its NPS score to its highest ever level.
“While a loss is disappointing, our performance has improved in 2018 despite challenging economic conditions and put us on a trajectory for growth and return to profitability.
“We continued to invest in a host of new initiatives to delight our customers, including greater choice by successfully launching three new ways to fly economy. Operationally, we achieved our best arrival performance since 1997 while also introducing four A330-200s in lightening quick time to support our customers through the Trent engine supply issue, which impacted our 787 fleet.
“Now it is time to build on these foundations and our vision to be the most loved travel company. 2019 is an exciting year for Virgin Atlantic as we undertake several transformative projects. We’ll assume our role as a founding member of a $13bn combined transatlantic joint venture with Delta, Air France and KLM. In the summer, we’ll introduce our brand new A350- 1000 aircraft to the fleet, and launch routes to Tel Aviv and São Paulo. And, the acquisition of Flybe will secure the future of Europe’s largest regional airline, extending the Virgin Atlantic experience and delivering more choice for customers connecting from the UK and Europe on to our long haul network.”
Tom Mackay, CFO Virgin Atlantic said: “We’re pleased our strategy has ensured that we can report the first year of positive revenue unit growth across the company since 2014. We remain in a confident and resilient position as we move into 2019, with £150m improvement in revenue and a 1.2% year on year reduction in non-fuel costs.
“While economic factors will continue to challenge us in the year ahead, we’re in a strong cash position with much to look forward to, including the anticipated arrival of our Airbus A350-1000 aircraft - helping to transform our fleet into one of the youngest, quietest and most fuel-efficient in the sky. The A350 will reduce our noise footprint at the airports we fly by 52% and will be 30% more fuel efficient than the four engine fleet.”
1 During the year the company was required to adopt the new revenue accounting standard IFRS 15, which resulted in the restatement of the prior year result to a loss before tax and exceptional items of £49.0m. The 2018 result has been prepared on a like for like basis.
2 Comparatives to 2017 are made on a constant currency basis, with the exception of profit before tax and exceptional items