Virgin Atlantic woos premium passengers
Reuters | Mar. 28, 2006
Virgin Atlantic Airways is investing in premium services for business class passengers to help offset rising fuel costs, the company's chairman, Richard Branson, said on Tuesday.
Oil price increases added USD$150 million to Virgin's fuel bill last year but company officials said the airline had managed to recover more than a third of that increase through a hedging strategy.
"There's obviously... pressure on yields because of the fuel prices," Branson told reporters in Dubai after arriving on Virgin's first flight to the Gulf Arab emirate, the region's booming trade and tourism hub.
"Despite the fuel price increase, Virgin has managed to remain profitable and I think we've done that by investing in the product. Business class is quite an important factor," he said.
Virgin Atlantic announced a pre-tax profit of GBP?68 million (USD$118.8 million) in 2004/2005.
More airlines are buying jet fuel swaps to hedge against yet higher prices in the years to come. British Airways, Virgin's main UK rival, has hedged more than three-quarters of its fuel for 2005/2006.
"The hedging strategy helped us recover more than a third of the increase in fuel costs." said Virgin's Chief Executive, Steve Ridgway.
"We passed most of the benefits on to our customers. But as prices keep rising, something has got to be done," he said, saying the fuel cost per seat on a London-New York flight had risen to GBP?90 (USD$157) from GBP?50 (USD$87) in the past few years.
Virgin introduced a fuel surcharge this month to help offset costs from oil's surge to record highs over the past year.
Branson said he was hopeful US authorities would soon approve the start of Virgin America, in which he is one of the main investors.
Virgin America is seeking approval for its ownership structure and business plan, despite opposition from a group of carriers which says Virgin America may violate federal laws that limit overseas investment in US airlines.
"(We) are hopeful that permission should be forthcoming in the next handful of months," he said.
On plans to forge an "open skies" agreement between the United States and the European Union, Branson said Washington was conceding too little.
The two sides reached a tentative deal last year that would expand aviation services and boost competition on both sides of the Atlantic. But the Europeans say no final agreement will be possible until the Americans clarify their position on foreign ownership of US airlines.
"I would hope that (they) will agree an open skies policy, but it has to be a real open skies policy not an American-based open skies policy." Branson said.
"There are these whole mass of restrictions on European carriers."