Virgin Atlantic has urged the government to consider “reversing course” after the mini-budget, with the collapsing pound massively driving up costs for airlines.
The chief executive, Shai Weiss, said the economic situation was “hurting consumers” and the airline was deeply concerned, even though it believed its own bookings would hold up.
The problems from the plunging pound will be the latest to beset the UK’s beleaguered airline and travel industry, which has battled back from Covid travel restrictions and through a year of disruption when labour shortages at airports have played havoc with flights.
Weiss said the prime minister, Liz Truss, should take a “difficult decision” to boost the pound, after the slump from Friday’s tax cuts – to be financed by additional government borrowing – announced by the chancellor, Kwasi Kwarteng.
Speaking at a press conference in London, he said: “The weakness of the pound is hurting, not Virgin Atlantic, it’s hurting the economy and it’s hurting consumers because it’s actually fulfilling or fuelling the inflation vicious cycle that we’re in.
“The message to government is pretty clear in my mind. You need to take a more difficult decision to reverse the declining pound and ensure that this country is not left with unsustainable perceived weakness in international markets, which of course then impact interest rates, impact consumers, impact mortgage rates, impact the entire economy.”
He added: “If this is the response to your decisions … considering what to do includes reversing.”
The comments were backed by an old rival of Virgin’s, the former British Airways boss Willie Walsh, now secretary general of global airline body Iata.
Walsh said Weiss’s “criticism is well-founded”. He said: “When you get volatility like you have seen in recent days, it definitely makes it much more challenging for airlines based in the UK with sterling revenues and dollar cost bases – for all of the airlines there.”
He added: “It’s going to be a challenging time there. It’s very frustrating when you see these kneejerk government responses in an effort to make themselves popular with the electorate, taking decisions that have massive economic impact on companies. I’m not sure all these policies were thought through carefully.”
Virgin had converted its sterling holding into dollars several months ago, Weiss said, a “smart financial position” that was now worth a considerable amount of money and was protecting it from the currency shock. About 60% of its outgoings are in dollars, mainly aircraft purchases and jet fuel.
However, he warned the government: “They need to stabilise the economic affairs of this country – we have the worst-performing currency in the G7; we don’t have to be at the bottom of the pile.”
Sales to US-based customers have grown to about 30-35% of Virgin Atlantic’s overall revenues since its joint venture with Atlanta-based Delta, Weiss said, and he anticipated that increased bookings from the US would cushion the airline.
With the pound almost at parity with the dollar, Weiss said the UK was in effect “on sale” for inbound tourists. “If you want to come and see the new King for half price, fly Virgin Atlantic,” he added.
However, Weiss insisted that Virgin Atlantic’s “fundamentals were sound”, although Sir Richard Branson’s carrier teetered on the financial brink during the pandemic, before being rescued by a huge cash injection from its shareholders.
Virgin and BA withdrew their largest planes, while Norwegian shrank away from the transatlantic market, from which 70% of Virgin’s revenues come. It plans to launch a new route, to Tampa from Heathrow next month, using its new A330neo plane.
Virgin has announced it was joining the SkyTeam airline alliance, after years of speculation. The airline said it would open more routes, benefits and lounges for its customers.