Virgin Atlantic confident of Anglo-U.S. aviation deal post Brexit

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By Alistair Smout

LONDON, Sept 7 (Reuters) - Britain is likely to have a bilateral arrangement governing transatlantic flights after it leaves the European Union, the head of Virgin Atlantic Airways said on Thursday.

Virgin Atlantic's chief executive Craig Kreeger also said that while the weaker pound had had a negative effect on the airline, this had not been as large as expected.

Britain needs to negotiate an air transport service agreement with the EU to keep airline services running when Britain leaves the bloc and will also need a replacement for the "open skies" agreement between the United States and the EU.

Ryanair's Michael O'Leary has issued stark warnings about the prospect of flights to the EU being grounded when Britain leaves in March 2019. However, Kreeger said that such a scenario for flights to the United States was unlikely.

"I have a lot of confidence that what we've seen this year is an indication of the fact that the UK is not going to cut itself off from the rest of the world, from a travel perspective," Kreeger told Reuters at an industry conference.

"I'm confident that the UK and U.S. will have a bilateral arrangement in place that means flights don't cease. The things that are really important will work their way out over time."

A sharp fall in the pound was one of the immediate impacts of Britain's vote to leave the EU in June 2016. That hurt Virgin Atlantic (Shanghai: 600558.SS - news) , which relies on revenues from British travellers in pounds but has many of its costs in dollars.

However, Kreeger said that demand from Britons to travel had held up better than expected, while the airline had also benefited from more visitors than expected from the United (Shenzhen: 000925.SZ - news) States and Asia.

"We'd anticipated it being a really rough year. But we've had a really encouraging year against that backdrop," he said.

"We have seen that Brits are resilient. The summer holiday is sacrosanct. Demand has dropped a little bit, but nowhere near what you would expect with a 15 percent increase in the cost of travel abroad."

In July, Virgin Atlantic said Air France-KLM (LSE: 0LN7.L - news) would buy 31 percent of the airline from Richard Branson's Virgin Group, making it the second largest Virgin Atlantic shareholder after U.S. airline Delta, which owns a 49 percent stake, and reducing Virgin Group's stake to 20 percent. (Reporting by Alistair Smout; Editing by Greg Mahlich and Alexander Smith)