Virgin Atlantic reaps the rewards from oil bet in pandemic rebound
Virgin Atlantic (Virgin) will offer the same number of seats for customers this summer as it did in 2019 – prior to the pandemic.
This follows the airline saving tens of millions of pounds, according to The Sunday Telegraph, after gambling that oil prices would rocket this year.
Last year, the company made a hedging call – opting to lock in prices for at least half its fuel needs this year at $90 per barrel.
Since then, Russia’s invasion of Ukraine has seen prices peak at 14-year highs of $139 per barrel, with both major benchmarks remaining elevated well above the $100 milestone.
This has enabled the airline to rebuild capacity, albeit with seven fewer planes in its fleet.
The savings have contributed to a revival in Virgin’s fortunes.
The newspaper has revealed that Virgin boss Shai Weiss has now staff the airline has finally staved off the threat of bankruptcy after a turbulent two years of lost trade.
During the pandemic, Sir Richard Branson offered to mortgage his Caribbean island home in return for an emergency UK Government loan to keep his airline in business.
Following a Westminster backlash, Virgin instead convinced creditors to defer debts and hedge fund Davidson Kempner to provide a £170m loan last year.
Continued talks resulted in a later restructuring, amid a reorganisation of hundreds of millions of pounds of complicated debts.
After being cash-strapped for the past two years, Virgin now has nearly £500m in its coffers.
Airline renews British Airways rivalry with Stateside route
The developments are also a boost for the group amid its long-running commercial rivalry with British Airways.
In contrast with Virgin, International Airlines Group expects British Airways’ capacity to be six per cent down on pre-pandemic levels.
Fuel is typically the airline’s largest single cost, and some companies have been exposed by soaring oil prices after failing to hedge costs.
For instance, low-cost carrier Wizz Air was forced to backtrack on its policy not to hedge fuel last week to avoid racking up big losses.
While transatlantic flights are seen as the calling card for British Airways, Virgin has announced it will begin flying to Austin this year.
It is the first time Virgin has launched a new route for seven years – with the company seemingly poised to challenge British Airways for customers once more.