What's your take on the fact that this is a MOU and not an aircraft order at this point? Why announce anything at all, especially when it seems it would do nothing but sound the alarm that VA has every intention of trying to becoming the next major success story. Are their competitors more or less likely to take them seriously and be ready to counter.
Sure VA is not the first airline to announce a MOU, but they aren't very common. If slots or something needed to be secured that could be done quietly...especially since there doesn't appear to be any money or commitments involved.
I'd agree with previous poster that their was probably more to putting this press release out:
1.) Airbus got their new "Sharklet A320's" in the news.
2.) VA got a ton of free press about being America's next big airline. More people are probably inclined to find out more about VA, more people will be watching to see the new markets, etc,etc.
Global News exposure for both being it took place at the Air Show.
Branson loves the press. Smart move whether they actually have a plan or not.
Fwiw:
http://online.wsj.com/article/BT-CO-20100722-709737.html
- JULY 22, 2010, 8:52 A.M. ET
UPDATE: Virgin America To Order 40 Airbus Jets Worth $3.3 Bln
(Updates and rewrites, adding detail and more comment.)
By Caroline Van Hasselt and David Pearson Of DOW JONES NEWSWIRES FARNBOROUGH, England (Dow Jones)--U.S.-based airline Virgin America plans to order 40 narrow-bodied Airbus jets, worth $3.3 billion, as part of its strategy to offer low-fare, eco-friendly service to 30 cities by 2016, its chief executive said Thursday.
The San Francisco-based airline has also taken options for another 20 A320s, doubling its fleet to 90 by 2016. The first delivery is scheduled for 2013.
"It's my 60th birthday this week, and I can't think of a better 60th birthday present than getting 60 aircraft," said Sir Richard Branson, speaking by video link from his hideaway on Necker Island in the British Virgin Islands. His Virgin Group owns 25% of Virgin America.
The airline plans to announce a new U.S. destination in the next 30 days, which will bring the cities it serves to 11, Virgin America's Chief Executive David Cush told Dow Jones Newswires at the Farnborough International Air Show.
The company, which recently opened up a new route to Toronto and plans two destinations in Mexico by this winter, intends to open three new routes every year, beginning in 2011. It opened five this year.
"The quality of airlines in America hasn't been good, and now people have a choice," said Branson. "I look forward to adding new routes...and adding the Caribbean as soon as possible."
Cush said the airline's fleet expansion is "relatively small" at about 6% to 7% of U.S. industry capacity, so he doesn't think its growth will be destabilizing for the industry. He added Delta Air Lines Inc. (DAL) is shedding 70 unneeded airplanes this year because of its merger with NorthWest Airlines Corp. (NWA)
Billing itself as a "green" airline, Virgin America will stock its fleet with Airbus's new "sharklet" option, which is said to enhance eco-efficiency and payload range, resulting in at least 3.5% reduced fuel burn over long haul flights. The airline said since its 2007 launch, its fleet is up to 25% more fuel efficient than the average U.S. fleet.
Cush said Virgin America met with Bombardier Inc. (BBD.B.T) about its mid-sized CSeries jet, which is also scheduled to enter the market in 2013. The Canadian planemaker so far has failed to announce another CSeries order at the air show, the year's biggest trade event.
"We looked at other aircraft but we were able to come to a good deal with Airbus on this plane, plus they are very committed to finding ways to improve the efficiency of the aircraft," Cush said. "That's obviously what we loved about the CSeries, as it's a very efficient aircraft and it's very environmentally friendly."
"Bombardier has a very compelling aircraft. Just the green nature of that aircraft, that's what we liked about it. In the end, the barriers to a second fleet are pretty tough. It just seemed like the best path for us."
Cush said Airbus is working hard to ensure its aircraft remain "state-of-the-art" and expects it to "be there in 2016, 2017," with a competitive offering.
"We'll certainly look at our options if there's another aircraft out there that's 15%-20% more fuel efficient and 15%-20% less carbon intensive. Our hope is that Airbus will have an option out there around that time period, but in all honesty, if they don't, because of the economics and our commitment to have sustainable transportation, we'll look at other options," Cush said.
Airbus will backstop the financing for about 15 planes, although that isn't expected to be necessary, Cush said.
The two companies expect to reach a binding agreement in the next few months.
Airbus is a division of European Aeronautic Defence & Space Co. NV (EAD.FR).
-By Caroline Van Hasselt, Dow Jones Newswires; 416-306-2023;
[email protected] and David Pearson, Dow Jones Newswires; +33140171740,
[email protected]
