Virgin Atlantic is to stop flying to Australia, having decided its Sydney route is no longer economically viable.

The last flights from Britain to Sydney on Sir Richard Branson’s airline will cease in May, leaving British Airways as the only UK airline to operate a direct daily service. Virgin is withdrawing its operations between Sydney and Hong Kong, the last leg of the flight, leaving the Chinese city as the furthest outpost for the airline, which has been forced to retrench after heavy losses over the last two years.

Virgin said increasing costs and a challenging economic environment had hit revenues. Some staff are likely to be laid off.

Craig Kreeger, Virgin Atlantic chief executive, said: “Despite the best efforts of our employees, external factors such as increasing costs and a weakening Australian dollar have affected our profitability.”

“These are still difficult times for the airline industry and as part of our strategy to operate more efficiently we need to deploy our aircraft to routes with the right level of demand to be financially viable.”

Virgin Australia, in which Branson retains a minor stake, is a separate company and continues to operate as a domestic rival to Qantas in Australia, with codeshare agreements with Etihad and Singapore Airlines for international flights.

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Photo Credit: A Virgin Atlantic logo is seen at check-in desks at Gatwick airport, in southern England December 21, 2007. Alessia Pierdomenico / Reuters