Virgin Atlantic plots course for return to profit this year

By Sarah Young

LONDON (Reuters) - British airline Virgin Atlantic (VA.UL) expects the benefits of its cost-cutting plan and a tie-up with U.S. carrier Delta Air Lines (DAL.N) to help it back to profit by the end of this year.

Virgin, which last posted a profit in 2011 and is in the middle of a two-year turnaround plan under new Chief Executive Craig Kreeger, halved its group pre-tax loss last year.

"These results, and what we've actually seen since the end of 2013, have us more than very confident that we will achieve this outcome," he said in a telephone interview on Thursday.

The airline, 51 percent owned by its British billionaire founder Richard Branson, reported a 51 million pound group pre-tax loss for the year to December 31. Virgin changed its financial reporting period last year but calculates the comparable 2012 loss would have been 102 million pounds.

Delta bought a 49 percent stake in Virgin last year and started operating a new joint venture with the British airline on January 1, which Kreeger said would help to push Virgin's bottom line into the black by attracting more U.S. customers.

COST SAVINGS

Also playing roles in the pick-up this year will be Virgin Atlantic Little Red, the company's short-haul operation between London Heathrow and three other British airports, and new aircraft with increased fuel efficiency.

The company is due to receive its first Boeing 787-9 Dreamliner this year and has 16 on order.

The improvement in Virgin Atlantic's losses last year was driven by more than 40 million pounds of cost savings, Kreeger said, citing significant improvements in fuel management.

Kreeger dismissed concerns about a European Commission examination of foreign holdings in European airlines, saying that the Delta deal had already undergone regulatory scrutiny.

Virgin, which like other established carriers has suffered in recent years from soaring fuel costs, increased competition and the global economic downturn, is playing catch-up with several other European long-haul carriers.

Transatlantic rival British Airways, part of IAG (ICAG.L), and Air France-KLM (AIRF.PA) both returned to profitability in 2013.

"One of the reasons the company has been a little slower to rebound was the delays we saw in the delivery of 787s," Kreeger said, referring to an aircraft order made in 2007.

(Editing by Kate Holton and David Goodman)