greedyairlineexec

Virgin America posts loss for first quarter in air


-- Virgin America lost nearly $35 million in its first quarter of domestic U.S. operation as the carrier plowed money into starting new routes to New York, Los Angeles and San Francisco.
The privately owned carrier, whose first flights were Aug. 8, had $16.16 million in operating revenue in the period ended Sept. 30, according to financial statistics released Monday by the U.S. Bureau of Transportation Statistics. Operating expenses, which totaled $51.16 million, swamped sales, the agency said.
"we never expected to turn a profit this early. ... Sales are beating our expectations In the airline industry, you have incredibly high launch overheads. As result of that, we never expected to turn a profit this early," said Virgin America spokeswoman Abby Lunardini.
She said the carrier has not disclosed a date by which it anticipates reaching profitability but has told shareholders it could take several quarters.
"Sales are beating our expectations," Lunardini said.
Started by British mogul Richard Branson four years ago, Virgin America got its wings this summer with flights between its San Francisco hub and New York and Los Angeles. The launch followed months of wrangling with the federal government over foreign-ownership rules. See earlier story.
The carrier has since expanded into markets such as Washington, D.C., and Las Vegas. Advertising low prices, brand-new planes with more legroom, and individual entertainment units, the carrier has put pressure on rivals JetBlue Airways Corp , Southwest Airlines Co and AMR Corp.

Sample SFO-JFK fares for flights leaving Jan. 4 and returning Jan. 11
JetBlue $339
American Airlines $359
Delta Air Lines $359
Virgin America $359


VAI Partners, composed of Black Canyon Capital and Cyrus Capital Partners, is the controlling shareholder in Virgin America. Carola Holdings Ltd., an entity affiliated with Britain's Virgin Group, holds a minority interest. Investors affiliated with the Virgin Group own slightly less than 25% of the U.S. carrier's voting stock.
U.S. regulations restrict foreign ownership of U.S. carriers to 25%; some major U.S. airlines and unions lobbied aggressively to block the entry of a carrier with foreign ties.
And Virgin America entered the market at a particularly tough time for U.S. airlines, which have watched oil prices climb by more than $30 a barrel since the start of the year.
Virgin America's passenger yield, which divides total passenger revenues by all paid miles flown, acting as a proxy for fare strength, came to 9.32 cents a mile in the third quarter.
JetBlue, in contrast, had a passenger yield of 10.4 cents, while Southwest had a yield of 12.3 cents.
For the same period, Virgin America reported unit revenue of 7.46 cents for every seat mile flown and unit costs of 23.63 cents a mile, said the Bureau of Transportation Statistics.
It now offers 44 flights a day and has started to sell tickets to two new markets: Seattle and San Diego. The company is aiming to enter as many as 30 cities in its first five years, said spokeswoman Lunardini.
In order to win clearance from U.S. aviation authorities, Branson's Virgin Group had to distance itself from the Burlingame, Calif.-based operator. Also, Virgin America CEO Fred Reid, a former Delta Air Lines executive, agreed to resign earlier this month. He was replaced by C. David Cush, a former senior vice president of global sales at American Airlines, to run the 1,000-employee company.

B757200ER

It's early; can't expect profits this soon.

They have enough start-up capital to last 36 months without making a dime.

greedyairlineexec

That is only maintaining the status quo, if they keep getting planes, hiring/training people, opening new cities their operating expenses increase, hence they do not have 36 months of cash. Their plan didn't call for this kind of oil price. while I do agree it is early, that is a big money lost no matter how you slice it. JB did not lost that kind of money (adjusted for inflation) on their first quarter.

We will see what their number show on the 4th and first quarters, that would be a good indication. Strong bookings don't mean sh!t if you can't cover expenses.

Slice

35 mil is a drop in the bucket for Branson.

greedyairlineexec

Sure it is, but do you understand that he cannot fund anymore of virgin america? CAL and AMR watched the influx of money like a hawk and made sure only 25% of the start up capital came from branson. He cannot invest one more dime. It is quite easy to follow the money trail when it comes in big chunks.

don't forget his european virgin express is a turd on a punch bawl and has been for over 10years.

captjns

Their are no laws regarding his American co-shareholders from securing loans for future operations.

Slice

I understand if there's a will, there's a way. If you have enough coin, you can make just about anything happen!

captjns

There are a quite a few carriers world wide that fall into that category... but they keep on turling in the eddy of the flush and miss the drain.

greedyairlineexec

as long as they are coming from US investors, not from Branson or the Virgin group. Those US investors are not airlines, they could care less about future codeshare with VA , improving air travel in the USA or anything, they care about short term ROI, they will cut their losses in there is not a turn around before putting more coin. that is still at least 24 months away, still 35 mill is a lot of money.

greedyairlineexec

That's my whole point, no one is worried about VA if they remain a 10 airplane turd like Virgin Express is. The worry is if they become a big airline and lower the bar even more.