Atlantic has reported its best profits performance in six years, despite losing £60 million to higher fuel costs.

Crawley-based Virgin reported pre-tax profits of £68 million in a year when it was forced to slap a fuel surcharge on air fares after oil prices hit new highs.

The carrier denied claims the surcharge was a tool to boost profits, saying it only recovered one-third of the additional costs it faced during the year.

The surcharge was introduced exactly a year ago and has been raised in line with the rapid increase in oil prices.

Virgin lifted the levy on a long-haul flight from £10 to £16 in March and key rivals such as British Airways have followed suit.

This year's profits figure of £68 million compares with £20.9 million for the previous ten months, while turnover also rose from £1.27 billion to £1.63 billion.

It means more than 8,000 staff will receive an annual profit-related bonus for the third year in a row, although Virgin did not give details of the average pay-out.

Details emerged a fortnight after British Airways said about 35,000 staff in the UK were to get bonuses after annual profits reached £415 million - its highest since 1998.

Sir Richard said he was proud of the performance in a tough year when "many leading players in the airline industry continued to struggle to survive" and the target of ten per cent annual growth in turnover remained unchanged.

High oil prices, overcapacity on Atlantic routes and slow economic recovery challenged airlines but Virgin Atlantic had countered this by the introduction of a new upper class suite.

This suite, which features the biggest flat bed in business class, helped attract new customers, with 4.4 million people flying with Virgin Atlantic last year compared with 3.4 million in the previous reporting period.

Despite the challenging operating environment, Virgin has continued to invest in its aircraft and launch flights to new destinations.

It took on three new Airbus A340-600 aircraft to bring its total fleet to 31 and has placed an order for up to 26 more planes worth £3 billion.

As part of his expansion plans, Sir Richard said he wanted to double the size of Virgin Atlantic by 2009, creating 3,000 new jobs at Gatwick.

The past year also saw Virgin add new routes to Mumbai, Havana and Nassau and the carrier plans to launch flights to Dubai and Montego Bay this year.

Tour operator Virgin Holidays lifted turnover to £407 million from £314 million, while the company said its cargo operations had also performed solidly.

May 31, 2005