Virgin America Reports First Quarter 2011 Financial Results

[Grandpa +65]

Press Release Source: Virgin America On Friday June 10, 2011, 2:48 pm
SAN FRANCISCO, June 10, 2011 /PRNewswire/ -- Virgin America today reports its financial results for the first quarter of 2011. Against the headwinds of significantly higher fuel prices and the resumption of its rapid growth, Virgin America reported a $29.5 million operating loss with its operating margin remaining steady at (14.7) percent. The airline reported strong revenue performance with $201 million in revenues for the first quarter – a 37 percent jump in revenue versus the first quarter of 2010. Virgin America continued to deliver significant unit revenue performance even as it ramped up in new markets, with a 12 percent improvement in revenue per available seat mile (RASM) year-over-year – a period in which the domestic industry’s RASM increased by 10 percent. The airline’s mature capacity RASM growth exceeded this, with performance in the carrier’s established markets improving by 20 percent year-over-year. During the quarter, the carrier’s scheduled capacity increased by 23 percent, compared to the domestic industry’s average capacity increase of one percent for the same period.
(Logo: http://photos.prnewswire.com/prnh/20090123/VIRGINAMERICALOGO)
“Despite the financial challenges of growth and rising fuel costs in the first quarter, we remain pleased with our revenue performance and overall progress as a young airline in a significant growthphase,” said Virgin America President and CEO David Cush. “While we are disappointed that our operating results fell shortof our expectations primarily due to fuel prices, we are encouraged that we were able to recover over half of the sharp fuel increase through revenue gains. Our strong sales performance and recent expansions to major business and leisure destinations such as Dallas-Fort Worth and Chicago forecast a strong overall picture for 2011 and beyond.”
Investment in growth and increased fuel prices accounted for the cost increases for the carrier year-over-year. The financial pressures of growth reduced first quarter operating results by $13 million, when accounting for the additional investment in capacity and the revenue ramp up associated with new routes. Operating expense per available seat mile excluding fuel (ex-fuel CASM) increased by 5 percent over the year earlier quarter, as a result of cost of idle capacity, primarily new teammates in training and new aircraft being modified to Virgin America standards. Although the airline’s new Airbus A320 Family fleet is up to 25 percent more fuel efficient than other domestic fleets, sharply rising fuel prices remained a challenge during the quarter. The skyrocketing cost of fuel accounted for 30 percent of the airline’s fuel cost increases year-over-year. The cost per gallon impact of fuel increased operating expense by $17 million over the increase attributed to the airline’s growth. Crude oil hedges offset $4 million of the airline’s overall fuel cost increase. A significant portion of the rise in jet fuel costs is due to the record high crack spreads experienced in February and March.
As one of the few growing U.S. airlines, Virgin America continues to expand its fleet, growing from 28 aircraft in service in the first quarter of 2010 to a projected 52 aircraft by the second quarter of 2012. In line with the airline’s overall growth trend, Virgin America continued to expand in the first quarter of 2011, with 35 average aircraft in service during the quarter – a growth rate of 25 percent from the year earlier period. With the addition of the carrier’s award-winning service to more new markets, including Dallas-Fort Worth, Los Cabos, Cancun and Orlando, the number of guests flown in the first quarter topped one million – up 14 percent over the year earlier period.
The airline has seen significant year-over-year increases in traffic, bookings and average fares in the second quarter of 2011. The airline will release its second quarter results later this summer.
“As a young airline, we must balance the need for expansion against the financial pressures that accompany growth. Adding service to four new cities during a short window is no small task for a new airline. However, our Company and teammates rose to the challenge and performed well – and our new markets continue to mature quickly. Our strong revenue performance, consumer enthusiasm for our unique product and the cost leverage we continue to gain from scale as we grow, will allow us to keep building a successful airline as we emerge from our current growth cycle,” added Cush.
First Quarter 2011 Reporting Highlights:

• Operating results: The airline reported a $29.5 million operating loss in the first quarter. The airline’s yield per passenger mile was 11 cents, up 13 percent compared to first quarter 2010.
• Load factors: The airline reported a 76 percent load factor in the first quarter, on a 23 percent increase in scheduled service capacity over the year earlier quarter – compared to the industry’s average capacity increase of one percent.
• Top line progress: RASM gains continued to outpace industry RASM gains, with a RASM increase of 12 percent over first quarter of 2010 – a period in which the domestic industry’s RASM increased by 10 percent. Mature capacity RASM exceeded this, with performance in the carrier’s established markets improving by 20 percent year-over-year. (New markets represented all of the airline’s capacity growth in the quarter and made up 19 percent of the airline’s total capacity in the quarter). Stage-length adjusted guest unit revenue was up 17 percent versus the year earlier quarter. Average fares increased by 22 percent over the year earlier quarter.
• Cost control: Operating expense per available seat mile excluding fuel (ex-fuel CASM) increased by 5 percent over the year earlier quarter, primarily as a result of investment in the Company’s growth (training, people and aircraft in modification) and the sale and leaseback of two A319 aircraft in December 2010.
• Cash: The airline ended the quarter with $25 million in unrestricted cash and $54 million in total liquidity.

http://finance.yahoo.com/news/Virgin-America-Reports-First-prnews-314227986.html?x=0&.v=1

 

[Fubijaakr]

Sure is a rosy picture for an outfit that has lost money EVERY quarter except one its entire 3 year life.

I notice he didn't talk about VX's performance in the YYZ or SNA markets. Hmmm.....

 

[Jetjockey]

Yeah, but they've got a big Richard at the helm..................what could go wrong?

 

[Tomct]

Sure is a rosy picture for an outfit that has lost money EVERY quarter except one its entire 3 year life.

I notice he didn't talk about VX's performance in the YYZ or SNA markets. Hmmm.....

Wow...you REALLY can't let that go can you??? Not feeling to badly when we are on track to make close to 1 Billion in operating revenue for the year. Our profit will come and as we continue to add planes and cites, it will only get better. Don't worry Fubi, you can still have a ride on our jump seat.

 

[n757st]

Wow...you REALLY can't let that go can you??? Not feeling to badly when we are on track to make close to 1 Billion in operating revenue for the year. Our profit will come and as we continue to add planes and cites, it will only get better. Don't worry Fubi, you can still have a ride on our jump seat.

Don't get so defensive. Revenue is good, operating profit is better, and a real profit is better then that. You are losing money, you know that, we know that. I hope things go well, I really do. You will mature, and become competitive in salary etc. You are very different then any other airline, everyone compares you to jetblue, but reality says we are very different. You are entering buisness markets with tons of established competition, we enter under served leisure destinations. Let's see if your model works, if so kudos.

 

[Fubijaakr]

Yeah, but they've got a big Richard at the helm..................what could go wrong?

That's Sir Dick to you, Ace.

 

[redflyer65]

What I thought was most interesting is how VA pulled out of Orange Co so quick. Orange Co is a cash cow for every single airline that's there..the margins are high. Not sure how they couldn't make money there.

Not surprised out the financials, with oil this high it's a tough thing to eek out any profits.

RF

 

[Yuppyguppy]

Skybus II

 

[GogglesPisano]

Wow...you REALLY can't let that go can you??? Not feeling to badly when we are on track to make close to 1 Billion in operating revenue for the year. Our profit will come and as we continue to add planes and cites, it will only get better. Don't worry Fubi, you can still have a ride on our jump seat.

The juice is strong with this one.

 

[DASHDRIVER]

I am probably trying to be overly optimistic. But, I try and concentrate on the improvements on the top line. Last year we had a 32% increase in revenue on only 17% increase in capacity. This first quarter, we continued to improve on that over our competition in the industry. Our system load factor going forward for the rest of the year are very high. Even in new markets where UA and AA are trying their best to flood the routes with airplanes and double mile deals. Our standard fair model is being used with only a few groupon deals in those markets and we are filling up planes. I really think as we close in on 50-60 airplanes our economy of scale will continue to improve to offset our capital expenditures and start showing operational, and then total profits.

We are shelling out a lot of money right now to set up a long standing infrastructure. I really think this will turn around as long as fuel status where it is or continues to drop.

4

 

[Tomct]

What I thought was most interesting is how VA pulled out of Orange Co so quick. Orange Co is a cash cow for every single airline that's there..the margins are high. Not sure how they couldn't make money there.

Not surprised out the financials, with oil this high it's a tough thing to eek out any profits.

RF

It wasn't that we weren't making money on that route, but they wanted to start other cities and due to the fact that "Alaska" was stomping their feet like a spoiled little brat in the corner with another DOT investigation, which for the 2nd time, was proven American Owned. We had to pull planes and add capacity to other cities that were performing better for us. But don't worry, like Dash said, 50-60 planes and we will begin to really turn up the ability to make money.

No Juice, just fact. Full planes with heavier ticket prices and all is good. Fuel is a problem for us, just like everyone else. Hopefully they get the oil price down or we are ALL in trouble! We are growing about 15% every 6 mos while the rest of the industry is growing at about 1% per 6 months.

Thanks 757, you get it. We will be fine.

Googs...Nevermind.

 

[Fubijaakr]

If you had full planes with heavy ticket prices, you'd be making money. You may have full planes, but you can't turn a profit.

Better go back and read the fire sale fares you've been getting out of ORD and DFW. You may have bodies in the back of the plane, but at $39 a head, you're LOSING. As confirmed by your 1Q result.

But you keep that red Kool-Aid IV in. Sir Dick couldn't operate without true believers. Neither could Jim Jones.

 

[LoveGun]

I hope we either turn a profit soon or go under. These Tomct vs Fubi threads are killing me.

Seriously though, management seems pretty confident about our financial viability. Either there is a lot of capital hidden on the sidelines or our management team has the best poker face in the history of the airline industry.

i hope VA makes it, not just because I work there, but because the VA business model is based on the belief that an airline seat is more than just a commodity -- that a passenger might buy a ticket based on service and brand loyalty. If VA is a success, then a lot of things in this industry might start to fall into place. Imagine if every airline was forced to look at quality of service or else loose pax to the competition. They might actually have to start treating their employees better. The way things are now, ticket price and frequent flyer programs are the only reason a passenger chooses one airline over another. Maybe if VA gets big enough the industry will be forced to react.

I realize it's still just a pipe dream considering we're hemoraging cash quarter after quarter. And, it's hard to be on a high horse when you work at the lowest paying carrier in the country. However, I still have hope for VA. Everyday I see hundreds of happy guests getting off our aircraft. Hopefully our investors are willing to hold on till we reach a the tipping point toward success.

 

[Flyby1206]

i hope VA makes it, not just because I work there, but because the VA business model is based on the belief that an airline seat is more than just a commodity -- that a passenger might buy a ticket based on service and brand loyalty. If VA is a success, then a lot of things in this industry might start to fall into place. Imagine if every airline was forced to look at quality of service or else loose pax to the competition. They might actually have to start treating their employees better. The way things are now, ticket price and frequent flyer programs are the only reason a passenger chooses one airline over another. Maybe if VA gets big enough the industry will be forced to react.

+1

It would be a huge step if VX could de-commoditize the business. I dont know if the airlines are really de-regulated enough to allow this to happen, but I hope they make it work.

 

[GuinessGuy]

Wow.....great idea, never heard that before.........I wish there was another airline like that.........

 

[Fubijaakr]

but because the VA business model is based on the belief that an airline seat is more than just a commodity -- that a passenger might buy a ticket based on service and brand loyalty. If VA is a success, then a lot of things in this industry might start to fall into place......
I realize it's still just a pipe dream considering we're hemoraging cash quarter after quarter.

At least you realize the folly of your pipe dream. While you may HOPE that consumers buy service, they don't.

The average passenger buys low fares. The high yield business flyer buys mileage to maintain their Gold status. Don't believe it? Last December I was in the hotel van with gal who was flying from PDX to Paris for LUNCH with a friend. Why? To up her miles on CAL.

VX can't match established carriers with EITHER of those demographics. What does that equal? Let's just say I'd keep your resume updated.

 

[Tomct]

At least you realize the folly of your pipe dream. While you may HOPE that consumers buy service, they don't.

The average passenger buys low fares. The high yield business flyer buys mileage to maintain their Gold status. Don't believe it? Last December I was in the hotel van with gal who was flying from PDX to Paris for LUNCH with a friend. Why? To up her miles on CAL.

VX can't match established carriers with EITHER of those demographics. What does that equal? Let's just say I'd keep your resume updated.

Funny, our load factors continue to improve and oh by the way, our First Class is one of the highest priced in the industry and we are full all the time. Don't forget that we have 3 levels of service, not just two. Yeah, there are $39 fares out there (just like everyone else) , maybe 3-5 per plane...maybe. The rest are right there or even a bit higher than the rest. Say what you will, but you will STILL be saying it 5 yrs from now when we have over 100 plus planes and getting bigger and stronger every year. But hey, you keep that positive attitude of yours going there Fubi....if I had to spend 5 seconds with you in the cockpit....I would kill myself. What a Tool. All those AK pilots are so lucky to have you on their team. uke:

Lovegun, don't you worry, we will be fine. Baring any catastrophe with Oil. If that happens, there will be furloughs and airlines folding all over the place. Hope that never happens.

 

[jayme]

If you had full planes with heavy ticket prices, you'd be making money. You may have full planes, but you can't turn a profit.

Better go back and read the fire sale fares you've been getting out of ORD and DFW. You may have bodies in the back of the plane, but at $39 a head, you're LOSING. As confirmed by your 1Q result.

Try booking a ticket on us and see what we're charging. Certainly not giving away the seats. I just saw $1889 one way SF to Boston (first class, which is head and shoulder above anything most other airlines offer.) I checked our non-rev internal site to see loads and some of those seats have already been sold at that price.

We're not making money, but it ain't cheap to start an airline the way we've been doing it. And the only way a sane investor lets management do what we've been doing is if there is a boatload of money behind the operation. I'm not saying we don't have insane investors, or inept management... who knows? But I sleep just fine at night, and know if we go down, we will have done our best to change the competitive landscape in domestic airline travel.

But I think we'll be fine. Thanks for your concern...

 

[Fubijaakr]

All I need to look at is your profit statements. You guys are bleeding cash. How long til Sir Dick pulls the plug just like he did at Virgin Blue and Virgin Nigeria?

Fortunately, all the recall offers will be gone by then.

 

[redflyer65]

It will be interesting to see how long the bleeding of cash continues. It's definitely hard to get capital when you are a young new airline...instead of being a legacy like American.

In the end, the airline seat is a commodity...albeit with good or poor customer service surrounding it. It's hard to break into new markets with any long term success when going up against the years of frequent flyer programs out there..someone mentioned this before.

One thing is true, having low cash on hand with a high debt load, and still trying to borrow money leads to higher credit interest rates and eventually vendors witholding services (because they know there is no cash behind the request).

This was the first nail in the coffin with Frontier. Credit card companies started calling for more cash which F9 didn't have...which triggered their bankruptcy.