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CHICAGO (Dow Jones)--Virgin America Inc. is looking to add up to 10 more aircraft next year in a sign that the loss-making carrier's business model may be gaining traction.
The airline has run up substantial losses since launching a low-cost, high service model from its San Francisco base in 2007, but it turned profitable during the summer and is targeting a full-year operating surplus in 2010.
Virgin America, like other carriers, had trimmed expansion plans amid the sharp decline in passenger traffic, and deferred some of the new Airbus A320s due to boost its existing fleet of 38 aircraft.
However, spokeswoman Abby Lunardini confirmed industry speculation that it was back in the market to boost capacity, despite widespread uncertainty about the strength of any recovery in demand and pricing power. "We're out in the market actively pursuing new aircraft for next year - perhaps as many as 10 additional aircraft," she said.
Virgin America, which is still embroiled in controversy over its ownership, reported a net loss of $15.8 million in the three months to June 30, compared with a $64.4 million deficit a year earlier. It lost $40.3 million in the first quarter. But revenue rose by 47% from the prior year's quarter to $135.9 million and average costs fell sharply.
The carrier is the creation of U.K. entrepreneur Richard Branson, whose Virgin Group owns 25% of the airline. Its launch was delayed by almost two years after a delay in securing regulatory approval linked to its ownership structure. To comply with U.S. law, 75% of the voting stock must be held by U.S. citizens.
Washington-based Alaska Airlines Inc. (ALK), which competes with Virgin America on West Coast routes, has taken up the industry baton in calling the airline's legality into question after U.S. investors opted to trigger a sale clause.
Virgin America has said it complies with the law and that the U.S. Transportation Department is aware of its potential changes. The airline has been seeking alternative investors after two private equity groups that provided the initial capital exercised options to sell their stakes earlier this year.
A Transportation Department spokesman has said it continues to review the protests from Alaska and others, as well as calls for a public hearing into Virgin America's ownership status.