Virgin Atlantic and British Airways traded verbal blows over the botched launch of Heathrow's Terminal 5 yesterday as BA's rival claimed a 38% rise in pre-tax profits.
The carrier founded by Sir Richard Branson reignited its feud with BA by claiming it enjoyed a strong start to the financial year thanks to "ongoing" problems at T5. BA hit back, saying the terminal is working well after its troubled debut, and "it is not surprising if other airlines are envious".
Heathrow's largest carrier has sought to dispel any lingering public concern over the building with an advertising campaign that gives the public live updates on security queues and check-in times.
"We do not recognise Virgin's claims to be taking business from us on the grounds that passengers do not like Terminal 5," BA said.
The latest spat spread to Virgin Atlantic's financial results, released yesterday. The privately held carrier said pre-tax profits excluding exceptional items rose from £44m to £60.9m in the financial year to February, on sales up 9.1% to £2.4bn, including a contribution from tour operator Virgin Holidays. Passenger numbers over the period rose 7.6% to 5.7 million.
"Against the backdrop of high oil prices and weakening consumer demand, we are well placed to succeed over the coming months," said Steve Ridgway, Virgin Atlantic's chief executive. BA said Virgin Atlantic's results indicated a pre-tax profit margin of "only" 2.6%, which paled in comparison to the 10% margin that BA achieved in recent annual results.
"In the same year, British Airways achieved a pre-tax profit margin ... nearly four times higher," BA said. Virgin Atlantic responded that BA had an unfair advantage due to its lucrative slot portfolio at Heathrow, where it owns 40% of the take-off and landing berths.
Relations between the carriers came under renewed strain recently when BA chief executive Willie Walsh accused Branson of sounding like a "cracked record" in his opposition to a planned alliance between BA and American Airlines. The Virgin tycoon returned to the theme yesterday, choosing to dwell on the AA tie-up rather than the increase in profits.
"Unless the regulators block the proposed BA/AA monopoly, consumers will lose out - and they'll pay higher ticket prices for the privilege," he said.
Virgin Atlantic said pre-tax profits in the first three months of the current financial year were £23.5m, with sales up 16% at £645.3m. It attributed that in part to the T5 effect.
Analysts believe its chances of recording a full-year profit are low when more profitable carriers such as Ryanair and BA are warning that they will struggle to break even. The strongest are expected to seek deals such as the BA/AA tie-up, and the impact of high fuel costs and softening passenger demand will burn up their cash balances. Virgin Atlantic said it had cash reserves of £838m at the end of June.
Virgin Atlantic's rivalry with BA centres on the Heathrow-New York market, where both carriers enjoy strong positions but face increased competition following the liberalisation of transatlantic air travel through the Open Skies treaty.
"While the outlook remains pretty overcast for the aviation industry, the winners will be those airlines that focus on offering the best customer service and which are nimble enough to take advantage of the opportunities that lie ahead," Ridgway said.
guardian.co.uk © Guardian Newspapers Limited 2008
