Virgin Atlantic could be about to reignite its decades-long dogfight with British Airways after a fortuitous bet that oil prices would rocket paid off following Russia's invasion of Ukraine.
In a departure from previous years, Sir Richard Branson's airline has locked in fuel prices for 2022 at $90 a barrel, saving the carrier tens of millions of pounds, the Telegraph has disclosed.
Virgin Atlantic will offer the same number of seats as in 2019 this summer. That is in contrast with the owner of British Airways, IAG, which expects its capacity to be 6% down, Barclays analysts said last week.
Shai Weiss, Virgin Atlantic's embattled boss, is understood to have now told staff that the airline has finally staved off the threat of bankruptcy after a turbulent two years during the pandemic.
Sir Richard offered to mortgage his Caribbean island home in return for an emergency UK Government loan to keep his airline in business after the pandemic hit.
The Telegraph adds that, following a backlash from Westminster, Virgin Atlantic instead convinced creditors to defer debts and hedge fund Davidson Kempner to provide a £170million loan.
The rescue was seen as an interim measure, however. Talks continued throughout much of 2021 to restructure hundreds of millions of pounds of complicated debts. Virgin Atlantic explored floating part of the airline on the London Stock Exchange, but a deal to reorganise its debts was agreed in December instead.
Virgin Atlantic hedged half its fuel costs at an equivalent of $90 a barrel shortly afterwards, according to industry sources.
With the futures price of Brent crude topping $130 a barrel last week, and some analysts warning it could yet soar well above $200 as Vladimir Putin steps up his onslaught against Ukraine - the move is likely to cut Virgin Atlantic's fuel bill by tens of millions of pounds.
Fuel is typically an airline's largest single cost, with some equating the running of an airline to being like running an "oil company with wings".
Some airlines have been caught out by soaring oil prices after failing to hedge costs. Low-cost carrier Wizz Air was forced to backtrack on its policy not to hedge fuel last week to avoid racking up big losses.
Transatlantic routes have historically been BA's most lucrative. The Telegraph says that running services to North America has justified the UK flag carrier running other flights at negligible or negative profit margins.
There has been little love lost between BA and Virgin Atlantic over the past four decades. Sir Richard launched the airline in 1984 to challenge BA and "put the fun back into flying".
The two carriers were then embroiled in the "dirty tricks" scandal in the 1990s, where BA was accused of trying to poach Virgin Atlantic customers.
FTSE 100
Meanwhile, the May futures price for Brent crude was just under $110 a barrel this morning.
The UK’s top share index, the FTSE 100, closed on Friday up 56 points at 7,155. It was down 3 points at 7,152 shortly after trading restarted this morning.
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