Uh oh!! Virgin America
11-16-2012, 05:54 AM
#1
Gets Weekends Off
Thread Starter
Joined APC: Jun 2006
Posts: 125
Uh oh!! Virgin America
Dear Teammates,
Later this morning, we will release our third quarter financial results along with an announcement of slowed growth plans and, specifically, an agreement with Airbus to restructure a portion of our current aircraft order. I wanted to share the news with you first before it hits the airwaves.
For the third quarter, we will report an operating profit of a $15.8 million and a 4% operating margin. Despite the continued pressure of fuel costs and 73% capacity growth over the past two years, we reported an operating profit, improved unit costs, and an increase in average fares. As we wind down from a period of rapid growth and as our new markets mature, we continue to see improved top-line results, including forecasting an operating profit for the fourth quarter of 2012, our company’s first fourth quarter profit. Today we will also announce a restructured aircraft order that will slow some of our future growth. We will reduce our current aircraft order from 30 A320 aircraft to ten aircraft, now slated to arrive in 2015-16. We will also defer our 30 Airbus A320neo aircraft from their current 2016 initial delivery date until 2020.
So what does this mean for the Company?
First, with current industry revenue environment and oil trends, this move to defer growth will immediately improve our financial results and provide a stronger foundation for the Company. Our fuel costs from the time we signed the original Airbus order to the summer of 2012 increased by $200 million above our original projections. For the past several years, we needed to grow to achieve a network size of some scale. However given oil costs, industry trends and the fact that we now have a network of sufficient scale, serving most of the top markets from both SFO and LAX, slower growth is a smart business decision that will improve our financial results and help keep your jobs secure. The shift from 30% year-over-year annual ASM growth to a more conservative mid-single digit ASM growth rate annually will give us the breathing room we need to fully mature all our markets and move to Full Year operational profit in 2013.
.
Second, this move to slow growth makes our foundation more stable. There will be no layoffs or furloughs and slower growth ensures our survival over the long-haul. It will, however, represent a change in some of the ways we do business. It will shift our focus from the breakneck pace of expansion we’ve experienced for the past two plus years to the task of how we build a better airline – for our guests and each other. Slowed growth will also allow us to offer some work/life options we couldn’t offer before given the previous pace of growth and will allow us to redirect resources into innovation and improvement of our current product.
Although, you may hear speculation to the contrary – this ability to slow growth is not a retreat or a sign of things to come. We’re at the size now where we can react to the market and adjust long-term growth plans if needed. In addition to improving our profitability, this allows decision allows us to improve our balance sheet, reducing debt by hundreds of millions of dollars. Our investors, Board and guests have confidence in our business model – and our margins within our mature markets clearly show that once people try flying on us – they come back, particularly, higher-yield business travelers. This is a credit to the business model and to the hard work of all of you.
I look forward to discussing the news in more detail with all of you at today’s All Hands.
Thanks
David
Later this morning, we will release our third quarter financial results along with an announcement of slowed growth plans and, specifically, an agreement with Airbus to restructure a portion of our current aircraft order. I wanted to share the news with you first before it hits the airwaves.
For the third quarter, we will report an operating profit of a $15.8 million and a 4% operating margin. Despite the continued pressure of fuel costs and 73% capacity growth over the past two years, we reported an operating profit, improved unit costs, and an increase in average fares. As we wind down from a period of rapid growth and as our new markets mature, we continue to see improved top-line results, including forecasting an operating profit for the fourth quarter of 2012, our company’s first fourth quarter profit. Today we will also announce a restructured aircraft order that will slow some of our future growth. We will reduce our current aircraft order from 30 A320 aircraft to ten aircraft, now slated to arrive in 2015-16. We will also defer our 30 Airbus A320neo aircraft from their current 2016 initial delivery date until 2020.
So what does this mean for the Company?
First, with current industry revenue environment and oil trends, this move to defer growth will immediately improve our financial results and provide a stronger foundation for the Company. Our fuel costs from the time we signed the original Airbus order to the summer of 2012 increased by $200 million above our original projections. For the past several years, we needed to grow to achieve a network size of some scale. However given oil costs, industry trends and the fact that we now have a network of sufficient scale, serving most of the top markets from both SFO and LAX, slower growth is a smart business decision that will improve our financial results and help keep your jobs secure. The shift from 30% year-over-year annual ASM growth to a more conservative mid-single digit ASM growth rate annually will give us the breathing room we need to fully mature all our markets and move to Full Year operational profit in 2013.
.
Second, this move to slow growth makes our foundation more stable. There will be no layoffs or furloughs and slower growth ensures our survival over the long-haul. It will, however, represent a change in some of the ways we do business. It will shift our focus from the breakneck pace of expansion we’ve experienced for the past two plus years to the task of how we build a better airline – for our guests and each other. Slowed growth will also allow us to offer some work/life options we couldn’t offer before given the previous pace of growth and will allow us to redirect resources into innovation and improvement of our current product.
Although, you may hear speculation to the contrary – this ability to slow growth is not a retreat or a sign of things to come. We’re at the size now where we can react to the market and adjust long-term growth plans if needed. In addition to improving our profitability, this allows decision allows us to improve our balance sheet, reducing debt by hundreds of millions of dollars. Our investors, Board and guests have confidence in our business model – and our margins within our mature markets clearly show that once people try flying on us – they come back, particularly, higher-yield business travelers. This is a credit to the business model and to the hard work of all of you.
I look forward to discussing the news in more detail with all of you at today’s All Hands.
Thanks
David
11-16-2012, 06:08 AM
#5
Can't abide NAI
Joined APC: Jun 2007
Position: Douglas Aerospace post production Flight Test & Work Around Engineering bulletin dissembler
Posts: 11,989
Mon Deux! They have actually found a need to make a profit! They've matured to the level my daughter's lemonade stand reached on it's third sale. Lets see, it took a two year old, assisted by a four year old, five minutes ... took Virgin America five years. My daugter never truthfully reported her financial results ... and come to think of it ... neither did Virgin America.
Virgin America coming out of manure spreading mode and trying to actually yield a harvest will be interesting to see. Prior to this a better business model would have been to give each customer $200 cash and the advice to fly United.
Good news for UCAL and Alaskan. Bad news for coasties who think $180 for a trans con is a rip off.
Virgin America coming out of manure spreading mode and trying to actually yield a harvest will be interesting to see. Prior to this a better business model would have been to give each customer $200 cash and the advice to fly United.
Good news for UCAL and Alaskan. Bad news for coasties who think $180 for a trans con is a rip off.
11-16-2012, 06:20 AM
#6
Gets Weekends Off
Joined APC: Aug 2012
Posts: 1,026
What a total retreat from all the flamboyant statements Branson threw around in October of last year. This guy is truly amazing to watch as he turns into his true huckster-mode.
Using the term slow-growth as related to what this statement says is like saying; “we are on a fast-track to zero mobility.”
Using the term slow-growth as related to what this statement says is like saying; “we are on a fast-track to zero mobility.”
11-16-2012, 06:25 AM
#7
Can't abide NAI
Joined APC: Jun 2007
Position: Douglas Aerospace post production Flight Test & Work Around Engineering bulletin dissembler
Posts: 11,989
Wild crazy rumor alert!!!! XXX Airline buys (or "partners with" to keep it legal) Virgin Atlantic to get coveted Heathrow slots; has to take Virgin America as part of the deal to give Branson et. al. a face saving exit.
11-16-2012, 06:35 AM
#9
Gets Weekends Off
Joined APC: Oct 2008
Position: -800
Posts: 386
On a personal note, I am happy to see the airline is making money.
Why are we as a pilot group want more pilots on a street? The excuse of "there low pay rates" is getting old. The airline has been in business for 5 years, what do you guys expect?
Why are we as a pilot group want more pilots on a street? The excuse of "there low pay rates" is getting old. The airline has been in business for 5 years, what do you guys expect?
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