Virgin Atlantic, the airline part-owned by Sir Richard Branson, today claimed to have lured passengers away from British Airways during this spring’s problems with Terminal 5, helping the carrier make a strong start to its financial year.

Virgin, which has begun a fierce campaign to prevent British Airways, American Airlines and Iberia from forming an alliance just short of a full merger, reported pre-tax profit before exceptionals up 38 per cent to £60.9 million for the 12 months to February 29.

Passenger numbers to the end of February jumped by 7.6 per cent to 5.7 million, a record for the airline, after it invested heavily in its business class facilities at Terminal 3, Heathrow and expanded its route network to 30 destinations.

Business class passengers rose by 22 per cent in the year, as Virgin’s promise to speed travellers through terminal security tempted passengers away from other airlines, particularly British Airways, it claimed.

Group sales, including sales of Virgin Holidays, rose 9.1 per cent to £2.3 billion. After exceptionals, pre-tax profits rose from £6 million to £34.8 million.

The annual profits will trigger a bonus pay-out to staff, some of whom had threatened the airline with industrial action over low pay earlier this year. They will now receive the equivalent of a week and half’s extra pay.

Despite the faltering economy, Virgin Atlantic also said it had seen a strong start to the current financial year with load factors up from 74 per cent to 77 per cent and pre-tax profits in the first quarter up to £23.5 million.

It attributed this strong start to the problems at Terminal 5, where British Airways had to cancel hundreds of flights and lost thousands of items of luggage when the terminal's opening was marred by extensive technical problems and staff’s unfamiliarity with their new workplace.

However, a spokesman for British Airways, said: "We do not recognise Virgin's claims to be taking business from us on the grounds that passengers do not like Terminal 5. Up to 65,000 passengers a day are now using Terminal 5, a number that has risen steadily from 40,000 a day in April."

"Passengers are extremely happy with Terminal 5, which is working well and provides an experience vastly superior to the rest of Heathrow."

Commenting on BA's proposed tie-up with American Airlines and Iberia, Sir Richard, president of Virgin Atlantic, said: “It’s ironic that just as regulators are breaking up one monopoly – BAA – British Airways and American Airlines are trying to create another. Our results prove that customers want choice on transatlantic routes.”

Stephen Ridgeway, chief executive of the airline, said that despite the downturn in the economy and record high jet fuel prices, Virgin Atlantic was well-placed to weather the storm.

“Our strategy of slowing our growth has paid off in-time for the slowdown in the industry. Against the backdrop of high oil prices and weakening consumer demand, we are well-placed to succeed over the coming months.”

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