Virgin Atlantic will freeze pay rises for its staff this year after soaring fuel costs drove the transatlantic carrier to more big losses.

An internal memo sent by the airline's new chief executive Craig Kreeger has reportedly warned that the airline's performance has been "well behind where we anticipated", with a significant loss in the year to February.

The memo did not mention specific figures but according to the Sunday Times the latest draft of the full-year results shows a deficit of £135 million.

The airline said in a statement that it faced "continued challenges" over the past year but that it was committed to a plan of short and long-term changes, while it has also taken the decision to suspend salary increases.

The airline, which was founded by tycoon Sir Richard Branson in 1984 and now flies around six million passengers, employs 9,000 people.

Virgin made a loss of £80 million in its previous financial year and has continued to suffer from the impact of high fuel costs, strong competition on transatlantic routes and taxes on UK air travel.

According to the memo seen by the newspaper, Mr Kreeger has initiated a broad-based cost-cutting plan, raising fears of job cuts at the airline.

Virgin is hoping its ties with US operator Delta, which acquired a 49% stake in the airline last year, will help it compete more forcefully with the British Airways-American Airlines alliance in the lucrative transatlantic market.

It has also set up a domestic service, Little Red, which flies from Heathrow to Edinburgh, Aberdeen and Manchester, and will refocus its fleet on leaner, cleaner aircraft instead of the older four-engine models that are more expensive to operate.

The company said in the statement: "These improvements will result in considerable financial savings. The airline has also made the decision to suspend salary increases for this financial year."


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