Virgin Atlantic’s annual profits almost doubled in the year to February as people continued to go on holidays abroad in spite of the recession.

The airline, which is majority-owned by Sir Richard Branson’s Virgin Group, said yesterday that sales had been boosted by an increase in the premium economy market and a number of low-price offers. Its most popular destinations included Florida, the Caribbean and South Africa.

By contrast, British Airways slumped to its biggest loss in more than two decades in the year to March 31 as premium-fare passengers stayed away or traded down and as fuel costs rose. At Virgin Atlantic, pre-tax profits soared from £34.8 million to £68.4 million in the year as more people flew in its premium classes.

Premium economy, where passengers pay about £200 more for extra legroom, better food and a glass of champagne, flourished as flyers downgraded from more expensive seats. The airline also offered cheaper tickets, such as a £300 return trip to New York.

Steve Ridgway, chief executive of Virgin Atlantic, said that the airline had increased its market share, but warned that this trading year would be much tougher. “We are just managing the business to make sure we remain strong and hang on to our cash,” he said.

The profit rise came against a background of a wildly fluctuating oil price, which reached a record high of $147 a barrel last July, and a global downturn in spending. The airline spent almost £1 billion on fuel during the year, but profits were aided by hedging its oil prices and currency benefits. The number of passengers went up by 70,000 to 5.77 million. Group sales, including those at Virgin Holidays, the tour operator, rose 8.4 per cent from £2.38 billion to £2.58 billion.

British Airways’ total passenger numbers in the year were 4.3 per cent down at 33.1 million, although this includes an extra month during which the global recession deepened.

BA announced its record annual operating loss of £401 million last Friday, after its fuel bill reached almost £3 billion. The airline was badly hit in the high-margin premium end of the business as many of its large corporate clients cut back on travel costs. Willie Walsh, the chief executive, and Keith Williams, finance director, said that they would work for nothing during July as they try to implement a programme of cuts.

Virgin is also having to slash its costs as the prospects for next year look bleak. The airline said in February that it would reduce its capacity by 7 to 10 per cent in the next year and cut up to 600 jobs, or 7 per cent of its workforce.

It is extending its agreement with bmi, which means that customers can fly with bmi to Heathrow from a regional airport and then on to a number of American cities, as well as Dubai, Nairobi and Delhi.

Virgin, which is part-owned by Singapore Airlines, criticised BA’s proposed transatlantic joint business with American Airlines and Iberia, which it said would hit competition on key routes to the United States. The tie-up would mean that the alliance would have more than half the aircraft flying some transatlantic routes. It could also lead to reduced marketing and operational costs for all three businesses.

Sir Richard said that the decision was “the first big test” for President Obama’s competition policy. He added: “I am sure that the Department of Transportation will put the interests of consumers first, rather than bow to the influence of the big-spending airline, with strong political connections.”

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