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LONDON - The chief executive of Virgin Atlantic said 2023 would be "tough" given the headwinds facing consumers after the transatlantic-focused carrier beat its plans for this year helped by a post-pandemic boom in travel.
Most European airlines have posted soaring profits this northern hemisphere summer as people took advantage of the first travel season without COVID-19 restrictions for three years.
But with inflation soaring and mortgage rates rising, disposable income is set to plunge, and analysts have asked how long the boom can last. Virgin Atlantic's CEO Shai Weiss said it was already coming to an end.
"It's going to be a tough 2023. We need, of course, the price of energy to come down and people's lives to be a bit better with inflation tamed," Weiss told an industry conference on Monday.
That compares to 2022, which Weiss said would show Virgin posting higher revenue than in 2019, the year before the pandemic, despite it flying 20% less capacity.
"It's been a very robust year, we've exceeded our plans," he said.
"Revenge travel", the idea that after years of lockdowns people were determined to travel despite high prices, helped lift Virgin's performance, he said.
Virgin's competitor IAG, which owns British Airways, also reported a strong summer, beating profit forecasts in October.
Virgin Atlantic - owned by billionaire Richard Branson's Virgin Group with a 51% stake and U.S. airline Delta which has a 49% stake - reports annual results early 2023.
Britain is already in recession, but Virgin had not yet seen a drop off in bookings, Weiss said, adding that the airline was planning for a downturn.
"I'm very cautious for 2023. I don't want to give any other sentiments other than cautious," he told Reuters on the sidelines of the conference.
The strong 2022 performance came despite a cap on capacity at London Heathrow, the main hub for both Virgin Atlantic and British Airways.
Heathrow has for decades been trying to expand, a move which Virgin formerly supported, but Weiss said his airline had cooled on a new runway lately, blaming Heathrow's desire to try to charge passengers much more to use it.
"We would support a third runway if, and only if, Heathrow remains competitive," Weiss said.
Virgin's support had gone from "unequivocal" to "tentative", he said.
Taking aim at the regulatory framework for airport pricing, which he said was "broken", he criticised Heathrow for focusing on "excessive dividends" for its shareholders and said it should instead be more fairly priced and open to competition.
(Reporting by Sarah Young, Writing by Paul Sandle, Editing by Kylie MacLellan and Emelia Sithole-Matarise)