Virgin Atlantic Focuses on U.S., Trims Asia in Delta Deal

(Corrects currency conversion in sixth paragraph on story that ran Sept. 3.)

Virgin Atlantic Airways Ltd. said it will add five daily U.S. flights, including a new route to Detroit, while scrapping services to cities including Tokyo and Mumbai following last year’s investment by Delta Air Lines Inc. (DAL)

Virgin, in which Delta purchased a 49 percent stake, will operate over 500 more flights next summer, it said today. Detroit, a major hub for the U.S. carrier, gets a daily service from London Heathrow, while Los Angeles, Delta’s Atlanta base and New York’s John F. Kennedy airport get extra daily trips.

The U.K. carrier, in which billionaire Richard Branson has a 51 percent stake, is rebuilding its business around a revenue-sharing alliance with Delta on North Atlantic flights. Virgin said it’s on course to end annual losses by the end of this year and is targeting record profitability by the end of 2018.

“We’re positioning ourselves to be a winning airline,” Chief Executive Officer Craig Kreeger, who joined from American Airlines (AAL) in February 2013, said in an interview. While Trans-Atlantic flying “has always been at the heart of our network and our most financially successful region,” Virgin Atlantic “remains committed to the rest of the world,” he added.

Crawley, England-based Virgin won antitrust clearance for joint trans-Atlantic operations with Delta last year, allowing the coordination of timetables and pricing and giving access to a network including more than 40 cities beyond New York.

Dreamliner Fleet

Kreeger is seeking to restore Branson’s best-known brand to profit without hurting its reputation for high service standards, and the company said today it will spend 300 million pounds ($489 million) on an enhanced “customer experience,” with improvements to include in-flight Wi-Fi and Virgin’s first lounge at Los Angeles airport.

The imminent addition of 16 Boeing Co. (BA) 787 Dreamliners will allow the replacement of aging Airbus Group NV (AIR) A340s, improving operational efficiency while boosting the image of a carrier best known for innovative customer perks such as resort-like lounges and motorcycle pickups.

Virgin Atlantic will drop four routes in total, with the exit from Tokyo and Mumbai cutting the Asia-Mideast network by one-third to four cities. The carrier is also exiting Cape Town, a winter-only service, leaving just two African destinations, and ceasing summer-only Vancouver flights.

Route Evaluation

“We put each route through a pretty simple lens,” Kreeger said. “Is it profitable? If it isn’t today can we see a path to it being so? If the answer to that question is no, is it strategically critical?.”

The U.S. expansion will feature an extra daily winter-season service from Heathrow to Miami, and a further summer trip to San Francisco, which will move to five flights per week. The revised network will include 12 U.S. destinations and eight holiday locations to the West Indies, based on information on the U.K. carrier’s website.

Delta will also perform one of Virgin’s Heathrow-Newark flights, with Virgin taking over a Manchester-Atlanta service from Delta, and the U.S. carrier will add a route from the north English city to New York Kennedy next summer.

Virgin Atlantic reported a pretax loss of 51 million pounds in 2013, before exceptional items, compared with a loss of 102 million pounds a year earlier. The company’s highest-ever profit of 98.7 million pounds was posted in fiscal 1999.

The Delta tie-up agreed upon at the end of 2012 saw the Atlanta-based airline pay $360 million to acquire a stake previously held by Singapore Airlines Ltd.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net Christopher Jasper

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