Class struggles at Virgin Atlantic | FT Alphaville

Class struggles at Virgin Atlantic

Hot on the heels of British Airways’ dismal 2008 results comes a stunning near-doubling of pre-tax profit from self-proclaimed arch-rival Virgin Atlantic.

From Virgin’s press release:

Virgin Atlantic, one of the world’s leading long-haul airlines, today said that pretax profits increased to £68.4 million during the last financial year, up from £34.8million the year before.

The strong results cover the period March 2008 to February 2009 and reflect an increase in the number of premium travellers choosing the airline, as well as prudent management decisions taken during the most volatile trading conditions in the airline’s 25-year history- where oil prices peaked at $147 per barrel and subsequently dipped as low as $38 per barrel.

Group sales, including leading tour operator Virgin Holidays, rose 8.4% from £2.380billion to £2.579billion. The total number of passengers carried during 2008 increased [1.2 per cent] to 5.77 million. Employees will benefit from a bonus payout, as 10% of the Group’s profits is shared among staff.

Since Virgin Atlantic is a closely-held company, the key here for market read-throughs is just how much of the airline’s profit jump came from its premium segment — Upper Class and Premium Economy. While pre-tax profits nearly doubled, revenue was up just 8.4 per cent, suggesting most of the carrier’s 2008 profits came from the cost-side of the equation, with expenses lowered by things like decent fuel hedging (unlike BA) and the scrapping of Virgin’s onboard beauty therapists.

Also adding to the question mark over premium demand, however, is the curious pricing currently taking place for Virgin tickets.

Premium Economy tickets are now a paltry £57 cheaper than the more luxurious Upper Class product on certain dates and flights (see below for an example). That suggests that the ticket option, introduced in 1992 but upgraded across Virgin’s fleet of Airbus A340s and Heathrow-based Boeing 747s as of April 2009, is either proving to be wildly popular among consumers or the bottom has well and truly fallen out of the Upper Class market.

Virgin Atlantic ticket prices - Upper Class

Virgin Atlantic ticket prices - Premium Economy

And since Upper Class tickets include access to the airline’s ClubHouse at Heathrow, complete with goodies like free Bumble & Bumble haircuts and facials at the Cowshed spa (surely worth the extra £57 in themselves), that also makes Virgin Upper Class FT Alphaville’s consumer tip of the day.

Related links:
Flying like it’s 1991 – FT Alphaville