• NC Software is proud to announce the release of APDL - Airline Pilot Logbook version 10.0. Click here to view APDL on the Apple App store and install now.
  • Logbook Pro for Apple iOS version 8.1 is now available on the App Store. Major update including signature endorsements and dark/light theme support. Click here to install now.

VA - So much for being "hip" if you can't make a profit doing it

Grandpa +65

Well-known member
Joined
Mar 1, 2006
Posts
315
Total Time
a lot
Five years since the low-cost but hip and high-tech airline started up, it has had only one profitable quarter. Executives say they're laying the groundwork for a money-making carrier by adding routes while rivals cut back.

Hugo Martín, Los Angeles Times
January 13, 2012

advertisement
Even by the standards of today's economy, Virgin America's financial health seems pretty weak: While enjoying a hip, high-tech reputation, the San Francisco airline has reported only one profitable three-month period since it launched nearly five years ago.

If the airline's executives are worried, they aren't showing it. In fact, they continue to hire at a brisk pace — 500 workers last year — and, at a time when other airlines are cutting back, they have added routes on a regular basis. They say they are laying the groundwork for a money-making airline.

"We are happy with the trajectory it's going," said billionaire Richard Branson, founder of the Virgin Group, a minority share owner in the privately held airline. "If we wanted to make profits, we would stop expanding."

Then again, the nation's only major California-based airline has never followed a traditional path.

Only a few months after launching in 2007, the airline held a Victoria Secret fashion show onboard a flight from Los Angeles to New York. Since 2010, the airline has teamed up with animal shelters in San Francisco to fly about 200 homeless Chihuahuas to New York to get them adopted by apartment dwellers in the Big Apple.

Virgin America is also the first U.S. airline to install power outlets near every seat and equips every cabin with soft lighting that changes from pink to blue to purple, based on the time of day.

It's a cool and hip style that has won over many young devoted passengers and helped beat out bigger and more established airlines for top awards from Conde Nast Traveler and Travel & Leisure magazines over the last four years. The airline's loyal customers, however, were quick to jump on Facebook to complain last fall when its reservation system went haywire.

But analysts wonder when such accolades will produce steady profits.

"It's kinda time for them to start making money," said Seth Kaplan, a managing partner at Airline Weekly, a trade publication.

Then again, other industry experts say, the upstart airline could be a gamble that is about to pay off big.

"With the established airlines cutting capacity, they might be filling a void," said Betsy Snyder, an airline analyst with Standard & Poors. "People who have flown them say they have a great product."

From the beginning, the airline faced strong head winds.

Virgin America, launched in August 2007, was envisioned as a low-cost airline with high-tech amenities, such as a touch-screen entertainment system, wireless Internet and cabins with soft mood lighting. Branson's Virgin Group holds 25% of the airline's voting stock, with VAI Partners, a consortium of U.S. investors, holding 75%.

Virgin America's main hub is San Francisco International Airport, but the airline is not limiting itself to the West Coast.

Today, the airline has 2,200 employees and serves 16 airports in the U.S. and Mexico, adding the newest destination, Palm Springs in December. Although the airline fits the technical definition of a low-cost airline, its fares are often beat by its bigger competitors.

"Our reason for starting Virgin America was the lack of quality in the country's airlines," Branson said.

But Virgin America's business plan put it in direct competition with low-cost carriers like Southwest Airlines and JetBlue, as well as major network carriers. Nearly 80% of Virgin America's routes now overlap those of major airlines like United Air Lines and American Airlines.

"I don't see them growing to overtake Southwest," said George Hobica, founder of the travel website Airfarewatchdog, "but they're definitely causing angina for JetBlue in some markets."

New York-based JetBlue shrugs off such talk.

"Virgin America's impact has not been greater than our expectations, and based on the consistent growth of our customer base in the market, JetBlue's award-winning service and superior product are preferred among L.A. travelers," JetBlue spokeswoman Alison Croyle said.

But the carrier's business plan grew even tougher as jet fuel prices climbed from about $1.20 per gallon in 2004 at the time Branson drew up the plans to launch Virgin America, to $2.90 a gallon in December.

Virgin America reported its first profits — $5.1 million — for the July-through-September period in 2009. It has operated in the red ever since. In its most recent earnings report, the airline reported a net loss of $3.3 million for the July-through-September period of 2011.

But Virgin America's chief executive, David Cush, rejects comparisons with older airlines that are not saddled with the expenses of adding staff and routes. In 2011, he said, the airline increased its capacity about 35%.

"We are building a critical mass of a route structure," he said. "That puts a lot of stress on revenue."

The airline has also been dogged by growing pains.

Since late October, glitches in a new reservation system have prompted angry passengers to fill Virgin America's Facebook page and Twitter account with complaints.

"As a loyal customer from the very beginning, I can not adequately express my frustration with my experience today," a longtime passenger wrote on Facebook in November. "After waiting 50 minutes and hanging up, I called back and am currently on hold for over an hour."

Cush said the reservation problems have been fixed. "We knew it would take a couple of months to work out the kinks," he said. "Unfortunately, it comes with the territory."

But Virgin America also has many loyal fans who rave about the cabin lighting, touch-screen entertainment system and onboard food service. The airline was the first in the nation to offer wireless Internet throughout its fleet. It plans to upgrade the onboard Wi-Fi, to quadruple its speed and capacity, starting early this year.

"Virgin America has a great attitude and aesthetic, and so far everything has been kept clean and shiny," said Laura Anne Edwards, the president of a Santa Monica media company who has flown Virgin America since it launched.

Based on fare comparisons for flights between several popular routes, Virgin America's prices are often on par or $20 to $30 higher than those of Delta, American and United airlines.

The challenge for Virgin America, analysts say, is to continue to attract more passengers willing to spend a few extra dollars for the airline's in-flight amenities and cool lighting.

Ray Neidl, an airline analyst for the New York wealth management firm the Maxim Group, said he was impressed with the airline's service and technology when he flew Virgin America for the first time in December.

"The big question," he said, "is can they carve out a market share with big profits and a unique product?"
 

Fubijaakr

Seniority is Forever
Joined
Dec 7, 2003
Posts
2,537
Total Time
Enough
Get ready for pay cuts...
 

pilotpm

Livin' the dream Baby!
Joined
Jun 7, 2008
Posts
107
Total Time
Oodles
Get ready for pay cuts...

You're slipping Fishubi. It took you a whole 5 hours to open your yapper on a new VX thread. I'd tell you to get a life but this seems to be the extent of your life.
 
Last edited:

Fubijaakr

Seniority is Forever
Joined
Dec 7, 2003
Posts
2,537
Total Time
Enough
Just my little way to spread the "good news" about working for VX.
 

NEDude

yada yada yada
Joined
Dec 12, 2001
Posts
1,611
Total Time
6000+
If the airline's executives are worried, they aren't showing it.
That my friends is the key statement from the article. The author, while making valid points for a publicly held company, has no real idea as to the inner financial workings of the company, nor where the company stands in relation to the expectations of the BOD.

Then again, other industry experts say, the upstart airline could be a gamble that is about to pay off big.
That is what many are banking on. Business is about taking a risk. Fortunately the most prominent guy in this risk taking venture has a pretty darn good track record.

You know who has a very rotten track record? Fubi.

Sorry to disappoint you Fubi (actually quite the opposite) but two more airplanes arrive this month, three new-hire classes, our new sim has just been delivered to our new training center, the BOD has approved a pay raise for crew members, and look for a new destination to be announced this week (smart money is on a place where "It's Always Sunny"). We are here and still growing.

And yes folks, for the record we already know the growth will stop in June until September 2013 - and we have known for almost a year now of that upcoming break. So for those of you who will post in June or July (and I am sure many of you will) that our stopping growth is a sign of impending doom, I will re-post this statement as a reminder that this was a long planned slowdown.
 
Last edited:

Busdriver320

Well-known member
Joined
Nov 13, 2007
Posts
53
Total Time
Enough
the BOD has approved a pay raise for crew members, and look for a new destination to be announced this week (smart money is on a place where "It's Always Sunny"). We are here and still growing.

NE,

Where are you getting this info? You and someone else are posting the raise has been approved but I haven't heard a peep on this. Not saying you're wrong, just wondering where the confirmation is coming from. Good news about the new desitination too, I just hope it isn't another one like the last one. That one was a bit of a letdown.

Cheers,
Bus
 

Fubijaakr

Seniority is Forever
Joined
Dec 7, 2003
Posts
2,537
Total Time
Enough
It hasn't. He's just huffing and puffing as usual.
 

SBD

Well-known member
Joined
Feb 19, 2006
Posts
379
Total Time
Y2K
That my friends is the key statement from the article. The author, while making valid points for a publicly held company, has no real idea as to the inner financial workings of the company, nor where the company stands in relation to the expectations of the BOD.

That is what many are banking on. Business is about taking a risk. Fortunately the most prominent guy in this risk taking venture has a pretty darn good track record.

You know who has a very rotten track record? Fubi.

Sorry to disappoint you Fubi (actually quite the opposite) but two more airplanes arrive this month, three new-hire classes, our new sim has just been delivered to our new training center, the BOD has approved a pay raise for crew members, and look for a new destination to be announced this week (smart money is on a place where "It's Always Sunny"). We are here and still growing.

And yes folks, for the record we already know the growth will stop in June until September 2013 - and we have known for almost a year now of that upcoming break. So for those of you who will post in June or July (and I am sure many of you will) that our stopping growth is a sign of impending doom, I will re-post this statement as a reminder that this was a long planned slowdown.

I think you might be hypoxic.
 

Fubijaakr

Seniority is Forever
Joined
Dec 7, 2003
Posts
2,537
Total Time
Enough
Nah, just a Red Kool-Aid junkie mainlining the propaganda.
 

NEDude

yada yada yada
Joined
Dec 12, 2001
Posts
1,611
Total Time
6000+
I think you might be hypoxic.

Tell what what was factually wrong about what I posted?

Aircraft are arriving.

The author does not know the inner workings or mindset of the BOD, nor does anyone on this board.

Richard Branson has made BILLIONS in his business ventures.

Fubi has been wrong so many times, on so many subjects, it isn't even funny anymore.

News reports are already out today about the new destination.

The simulator has been delivered.

New hires are in training.

The future hiatus in aircraft deliveries has been in the plans for quite some time, even included in a power point from a company meeting from one year ago.

All of those are facts, and easily verified.
 

Fubijaakr

Seniority is Forever
Joined
Dec 7, 2003
Posts
2,537
Total Time
Enough
Okay, I will admit I was wrong about that. Perhaps I am hypoxic after all...

Guess you just let the cheer leading get the best of you. At least YOU won't abandon ship when it sinks like some Italian cruise line CA.
 

hyflyin

Well-known member
Joined
Dec 7, 2007
Posts
382
Total Time
Whoa
Can't wait to watch Fubullshiz and the like....pound on their tantrum boards when the cash starts a flowing. Get ready doubters!

Are you talking about our wages?:nuts:

Kidding of course, I hope you are right, because if your not......... ugly!!
 

Fubijaakr

Seniority is Forever
Joined
Dec 7, 2003
Posts
2,537
Total Time
Enough
Let's just say, one profitable quarter in 4 years isn't promising.
 

Fubijaakr

Seniority is Forever
Joined
Dec 7, 2003
Posts
2,537
Total Time
Enough
I'm down. I understand you want to succeed, but the deck is stacked against you. Here's why:

1. SFO hub.
2. Competitor's frequent flyer programs.
3. Sir Dick won't pour money down the rathole forever.

You have to start making money or it's finito.
 

Q400 Gear Bitch

Nationwide Beer Taster
Joined
May 21, 2005
Posts
269
Total Time
401k
I'm down. I understand you want to succeed, but the deck is stacked against you. Here's why:

1. SFO hub.
2. Competitor's frequent flyer programs.
3. Sir Dick won't pour money down the rathole forever.

You have to start making money or it's finito.


Totally agree on the SFO hub. When it's nice out, it's great. But being a 1-2-3 airport puts a hamper on the operation for sure. For those not based at SFO a 1-2-3 airport means 1 cloud + 2 airplanes=3 hour delay.

Our freq flyer program isnt great....yet. As for the $$ part, way above my paygrade, but the airline is coming up on 5 years of operating and still continuing to grow. Obviously the investors see potential here, as do most of the employee group. As for the making money part, or we close, you are absolutely right. So stay tuned. Cheers!
 

ackattacker

Client 9
Joined
Nov 14, 2004
Posts
2,125
Total Time
hah!
Totally agree on the SFO hub. When it's nice out, it's great. But being a 1-2-3 airport puts a hamper on the operation for sure. For those not based at SFO a 1-2-3 airport means 1 cloud + 2 airplanes=3 hour delay.

Our freq flyer program isnt great....yet. As for the $$ part, way above my paygrade, but the airline is coming up on 5 years of operating and still continuing to grow. Obviously the investors see potential here, as do most of the employee group. As for the making money part, or we close, you are absolutely right. So stay tuned. Cheers!

This year will be the real test, when they put a temporary stop to the growth. If they can't make money with what they have now then it's pretty much a sign that they'll never make money.

I will reserve judgement but my gut feeling is that their business model (going after legacy carriers in their core markets) doesn't make a whole lot of sense. And I feel that 2012 is likely to bring modest business travel growth and continued elevated fuel prices, which the legacies have positioned themselves to weather but doesn't bode well for VA.
 
Last edited:
Top