Virgin Atlantic plots British Airways blitz after oil bet pays off

Virgin Atlantic hedged half its fuel costs at an equivalent of $90 a barrel shortly afterwards, according to industry sources. 

With oil hitting almost $140 in the past 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. 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.

In 2012, Willie Walsh, then boss of IAG, bet Sir Richard that his airline would be bankrupt within five years, and would take “a knee to the groin” if he was wrong.

After being strapped for cash during much of the pandemic, Virgin Atlantic now has nearly £500m in its coffers, sources said. 

And by running the same capacity as 2019 with seven fewer aircraft, bosses are understood to be confident that a long-awaited return to profitability is on the cards. 

In May, Virgin Atlantic will begin flying to Austin, the first time it has launched a new route for seven years.

Airlines see the removal of all barriers to travel as paramount. Transatlantic carriers are bracing for an announcement by US aviation authorities later this week in which Washington is expected to drop the need for passengers to fill out pre-departure forms.

A requirement for face coverings on transatlantic flights is expected to be abandoned in mid-April, but could yet be pushed back by the Biden Administration.