Could VA be next?
 

I was shocked to read this today:

"Avondale Partners airline analyst Bob McAdoo, predicted in a research note Monday that upstart Virgin America -- which is privately held and therefore releases less operating information than publicly owned carriers -- could be the next casualty.
McAdoo cited preliminary filings with the Department of Transportation that suggest the carrier is rapidly losing money, and flew planes that were considerably emptier than some of its competitors through the end of last year.
"We caution that these estimates are based on limited (Transportation Department) filings and may be overly pessimistic," he wrote. "However, given the ownership structure of Virgin America ... we see parallels between Virgin and the three failed airlines."
Virgin America spokeswoman Abby Lunardini, reached as the carrier prepared to launch a new route between Los Angeles and Seattle, dismissed concerns about the company's health and said the Burlingame, Calif.-based carrier's occupancy levels had improved considerably in recent weeks.
"Our business model is strong and we're continuing to grow aggressively," she said."

:eek:


Anyone have any other information on the subject? I thought VA was doing better than this.

They recently advertised a "2-for-1" sale, out of LAX and SFO, which the analysts prognosticated that they desperately needed to raise cash.

Not sure if they're in so much turmoil, as they started out with $207 million last August, highest in history. They must have a cash reserve.

Can't sir richard just open his wallet and slip them a couple mil?

Not unless he can get around the rules for foreign investment.

Where there's a will there's a way. ;)

How right you are!


http://online.wsj.com/article/SB1207...oo_hs&ru=yahoo
Virgin America Investors To Inject $100 Million


By Paulo Prada
Word Count: 533 | Companies Featured in This Article: Frontier Airlines Holdings
U.S. and British investors behind Virgin America, the start-up U.S. carrier conceived by Sir Richard Branson, say they can weather the current turbulence slamming airlines and plan to soon inject about $100 million of additional capital into the company.
Undeterred by record-high fuel prices and a shaky economic outlook, investors of the closely held airline based in Burlingame, Calif., are sticking to their original business plan and are moving ahead with financing for further expansion. Virgin America launched passenger service between San Francisco and New York last August, and later initiated service to Washington, Las Vegas and San Diego. This ...

Does anyone know how much money VA in lost in 2007?

That's what I'm talking about!!!!!!!:D

Richard need only make a call to one of his investment banks in the UK and call in some favors and magically a US investor will appear. I think VX is safe.. had it been like SX with no billionaire money behind it, then we'd be writing the obituary. They're fortunate in that they can ride out this time, establish their market and grow the airline. SX could have done this had their investors been less skittish..

VA can take all the cash they can carry, but if they continue to lose money month after month, eventually the investors will stop being so generous.

I think they'll be gone within two years.

Nevermind. My question was answered on another thread. VA lost $35 million dollars in Q3 2007. That is pretty crazy considering they only operated during 1/2 the quarter (they started Aug 8 IIRC). That is even scarier when you consider that the 3rd quarter is typically one of the most profitable quarters for airlines. And even scarier considering that oil averaged about $75/barrel in 3Q 2007. And now is over $110/barrel.

I am very interested to see the 4Q 2007 numbers. It sounds to me like VA could burn through that $100 million dollars in a few months if they keep operating the way they have.

Happened before. Check out Virgin Express. Branson isn't King Midas.

THey don't expect to be profitable for some time...

We are expecting to be profitable in 2010 with $110 / barrel oil. As for the $100 million inject that was given to us not out of actual need but to allow us to get better financing on the next few aircraft we get. Thats straight from the CEO 30 mins ago.

Bob McAdoo used to work with a certain Jonathan Ornstein at Virgin Express and later at Mesa Airlines with the same JO. It seems that things didn't go well for them in Europe and Bob not surprisingly isn't to keen on the Virgin brand. He is keen on the Mesa brand which makes his opinions suspect to me at best.

I have never heard of Virgin express but if you guys want to talk about the performance of virgin brand than why not talk about the excellent service and the performance of Virgin Atlantic.:)and Virgin America is also following their foot steps.And who is this character Bob from Mesa anyways,how does he and Mesa come in the pic.

Virgin America is here to stay so get used to it and instead of predicting doom for them praise them for providing a better service which unfortunately is not offered by any other US carrier.

I think VX is doing what I've said this country needed all along.. a return to basics. Customers first.. We've gone from the good 'ol days of flying in the 60's and 70's with great service, smiling "Stewardesses" and good food, to a bag of peanuts and a "Sit down shut up, and buckle up" "we're here only for your safety" culture.. You can take care of safety and do it without being so upfront about it and paint a smile on it.. that's been lost on todays airline employee. I respect this return to basic service. I think when the economy turns, should VX be able to weather it (and I think with the help of Sir Richard, they will), they'll be a strong alternative for the public.

Not to mention, their fares are great, and the interiors with the amenities are second to none here in the US.

Check out the first post on this thread.

There is no airline currently operating that isn't expecting to be profitable in 2010. None. There cannot be a more useless forecast than that one, sorry.

Its hard for me to imagine that investors injected 100 mil for any other reason than the struggling start-up carrier needed it. That said, despite seeing no end to the cash drain at VA, it is very impressive to hear another 100 mil being thrown into the fire. Of course, the strings that come attached to that money may not permit it to be pumped into the wings of the fleet which begs the question again: How much more pain can VA, Spirit, JetBlue, and any other carrier not owned and fueled by a sheik or sitting on a very large pile of cash take?

VA, being privately held, is certainly not going to be open enough to give the gorilla sized competition a clear picture on how much blood is left to be bled and will adopt any and all posturing it can to appear unbleedable. The runaway fuel costs have dictated the game and no amount of IFE can change the rules of the game currently being played, which is: Who can stand on one foot and bleed the longest?

I dig the IFE, the attitude, and the good kool-aid and if this industry made sense those attributes would prevail. Unfortunately, and especially with runaway fuel costs, the big gorilla you compete with knows its all about being able to stand on one foot, and leak.

DigDug.. first off, you can't compare the growth plan of a startup and a mature business... more over, you can't expect a startup, with the huge ramp up costs to turn a profit with in a few months of operations.

Think about it, VX started revenue service in August.. but has been accruing costs and ramp up costs for a year prior.. How on God's earth can they do anything but loose a lot of cash in the first few quarters until their fleet size reaches a level that makes sense to their overhead?

Finally, the $100M was a planned investment as part of the business plan. The fact that it was put in, rather than withheld tells me the investors have confidence in the company and decided to continue with their plans of growth. They could have done like the investors at SX and simply cut their losses and pulled the plug..

I've been rolling through this meatgrinder too long to be confused about the difference between start-up losses and an established carrier's ongoing financial performance.

You missed the point it seems. Different variables can determine your fate under different circumstances. While quality of customer service, giving great IFE, etc. can be the key to success, NOW ain't that time. Now, its cash to burn rate (CasBur), and time remaining until better economics land (TRUBEL). VA will be a ghost unless CasBur can see you through the TRUBEL.

You are right that the 100 mil thing sounds like impressive committment to the venture. With enough committment and money there is no limit to how long VA can stay in business. Obviously though, there are limits and I suggest that AFTER the blood race subsides THEN it will really be up to the quality of the product to play a role in carving out a future.

Look at Arpey at AMR, he just gleefully canceled thousands of flights because its better cash management in this disasterous environment to stop actually operating your airline if you can find an opportunity to duck out of a bunch of the otherwise unavoidable expenses. [cue the FAA]

In today's environment, any airline is better of liquidated for cash, and then re-invested in commodities.. but one has to take a long view if one is to remain in business. There will come pricing power, and the overly inflated cost of oil will re-stabilize... it's a lot of speculation that's keeping it above 60/70 per barrel, and as with the .com or real estate investment du jur bubble, it will also pop.

I hear that.

I'll add: You have to also be able to survive while taking that long view.

Perhaps the investors in VA figure they can see this through and have both the conviction and the dough to do it. I think it has so far shown style, enthusiasm, and a nice focus on a quality product and this industry can definitely use more of that - even if it is a hyper-competitive, overcrowded market. I'll go with style, enthusiasm, and quality any day.

Haha. This is ridiculous. I have friends at VA who would disagree with you.

Ha. You have quite a self-rightous attitude, assuming you deserve praise for your efforts. That's something you will have to earn from the american public. Good luck, I for one will be amazed if you're in business in 2010.

BTW Virgin Blue (Aussies) is one of the most profitable airlines in the world after Ryan Air and just aquired couple B777 for Auss-US flights , oh and Virgin Nigeria is doing pretty well so is Virgin Atlantic. Also Virgin Russia is on its way.

virgin blue is owned by Toll holdings, wich is a huge tranportation componay in Australia, the virgin group owns a minority stake of the airline and it is not involved on V-Blue, wich is the 777 operation. it has 55 airplanes, and their only real competition is quantas, hardly the same market as US and Europe.

Virgin Nigeria has 7 planes, and they came to replace the bankrrupted goverment owned nigerian airlines, so they have the same small goverment market monopoly, plus the cash came from nigerian investors ( oil I assume?)

Virgin Atlantic is 49% owned by singapore aielines, has 19 planes.when it started it was competing agains BA .

point is , the only time they had real comoetition (europe "domestic") they failed (virgin express). the US domestic has real competition too. I would not get too cocky.

VA can expect to get bled by the other established airlines. JetBlue, Alaska SWA and United have deeper pockets and will match intro fares and hold them down. This will make it tough for VA to raise ticket prices once it has market share and will result in low to negative cash flow. It will then just be a matter of who can bleed the longest. B6 survived Song but then fuel prices were a whole lot lower. This is not a good time IMHO to be starting up an airline.

"Their fares are great" We are Airline Pilots....NOT MANAGERS. we have a duty to uphold ( what is left ) of this profession. NO ONE should be working for any statups that pay crap wages. I know ya do what ya gotta do, but the more people take lesser paying jobs for the "Hope" of upgrading/expansion/pretty F/S'a, the harder it is for "The Profession" to negotiate wages even close to years gone by.

You are out in left field reino! I assume all VA's lawyers, insurance companies, airplane parts companies and health plan administrators all accept lower than normal pay just because VA is a startup. Since they are just a start-up everyone knows they cannot make industry wages. Or is it just the pilots subsidizing this effort?

Its a fantastic idea to promote big picture thinking for the profession and to promote solidarity. But to really back that chatter up you have to identify the priorities required to achieve your goal and then get busy. You CANNOT expect ANY useful percentage of pilots to back you up the way you are spouting about above UNLESS and UNTIL you/us/we do something to dismantle the meatgrinder. "You" have negotiated and perpetuated the meatgrinder by crapping on the new hire with obscene pay in the first few years while the deregulated industry continues to churn and toss people back out into the hopper feeding that meatgrinder. Seniority rules and until "you" get after a national seniority plan of some sort to correct the deregulation meatgrinder the start-up will continue to have a strong pull.

Do you really have any doubt that each guy out there is doing his best to make the best choices he can from the options available? Do you really expect anybody to substantially "sell himself short" to uphold your ideals for the profession? Jam the gears of that meatgrinder first, THEN try to talk solidarity to the "applying for a job" crowd that includes 20+ year veterans looking at a $2000/mo "fresh starts" in this furlough and fold industry.

deep down inside im applauding and cheering! :D

Great point. The current system leaves a lot to be desired (as does much with this profession) when your talent and experience is worth $153 + hr and the next month your making $43 hr. Tell a Doctor or Lawyer to take that kind of hit when they make a new start. I don't have the answer, but with all the sacrifices Pilots make there has got to be a better way. That said, anyone who has ever been furloughed is usually just happy to get a job with a good company, I know I was.

Like I said that Virgin America is here to stay so please get used to it:D

I hope you are serious when you say that Virgin America has competition in U.S.Serving peanuts,water,no inflight entertainment,out of shape digruntled grannies shouting orders at passengers must be your idea of competition:pKindly face the facts that Virgin America faces no real competition at least from US carriers.

You really think that VA is the only US carrier with inflight entertainment, and the only one that serves something other than water or peanuts? You may have me on the grannies part.:(

Let's see, where have I heard that before.....

Oh yeah, now I remember. And I also remeber about how they were the best financed startup...blah...blah...blah....

Dude, how many planes does VA have on property right now? To make a statement like that is pretty naive I think. I fly for a carrier that has been around 75 years and I would not make that comment. But, if it helps you sleep better at night keep repeating it to yourself. Maybe you will believe it one day.

Can I get a FREAKING Amen! Wow, someone gets it!




Truth be told, this going on and on about wages at VX misses the most important point.. the W2.

Year one at VX, my W2 is as good or better than most airlines
Year two, somewhere then I'm a CA, and my W2 is significantly better than most.


In the end, CA or FO, I'm a high time, multi-type rated pilot having flown 16,000lb to 633,000lb airplanes all over the world... I'm not worried so much about what seat I'm in, as what the net on my W2 is.

I think given time, VX will pay what any other narrow body A320 pays.. but to be worried about a 10 airplane airline undercutting the wages that were set forth by the concessions of 2001-2002 is a red herring at best.

Just out of interest. Have you ever heard of JetBlue. I think you are living in your own little world.