Virgin America QOL

[bri5150]

YOUR CEO stated that VX was going to stop opening additional stations because he claimed that the cost of opening new stations was the reason why VX was losing money (high cost of opening new destinations). So what's he done since that announcement? Announced that EWR and SJC will be new destinations for VX. I never bought the argument that opening new stations was VX's problem; VX's problem is that you guys are trying to sell conspicuous consumption in a Walmart world.

As to your second rebuttal - aircraft utilization - let's break down the numbers for VX's new proposed service.
SJC-LAX @4 RTs/day. That's a minimum of 3: 00 x 4 = 12 hours.
LAX-LAS @3 RTs/day. That's a minimum of 2:30 x 3 = 7:30 hrs.
LAX/SFO-EWR @6 RTs/day. That's a minimum of 11: 00 x 6 = 66 hours.
12 + 7:30 + 66 = 85:30/day additional flying.
VX is currently flying their aircraft more than 12 hours/day. There isn't much room for flying the aircraft additional hours. What you're suggesting is that VX will be able to get more than an additional 1:30/day out of their aircraft. While it's not mathematically impossible, I don't expect that you'll get high load factors on the multiple 2-4 AM departures that would be required to get that high a utilization rate.

Where'd I get the $100M figure? Simple math. The latest four quarters show a $99M cash burn rate. The problem is that VX's numbers have been deteriorating since 2010. I realize that some of you think that VX has turned a corner and the cash burn is suddenly going to stop but I see nothing but continued poor decisions at VX. The LAX Elevate Club is your management's latest plan to flush more cash down the crapper.

Have I seen the 4Q numbers? Yes. I've seen the 2008, 2009, 2010, and 2011 4Q numbers. And from those and other quarterly numbers, VX has a track record. And the pattern of best to worst quarters is: 3Q, 2Q, 4Q, and 1Q. So even if VX had a 'great' 4Q quarter and only burned $10M in cash, it won't matter much because 1Q has always been VX's bloodbath quarter. Absent additional investment capital, VX will be out of cash before they turn a wheel in SJC.



I find it rather humorous that someone who, by all appearances, hasn't even read a VX quarterly report, much less know when VX has traditionally released them, would mock someone who has actually read VX's quarterly reports.

I have no doubt that EWR happened because they have been working on it for 5 years and it just happened when it happened. They weren't going to not go now because of our lack of aircraft. As far as SJC, I think it is good and bad. I would have rather seen another completely new market, but maybe they feel this one will mature quickly because it is an already established market. Also, it will be nice to have a close divert airport (with our staff there) for us being in SFO. Also, like EWR, apparently it has been highly requested by the people that fly on our airline. It is close to the tech hub of the United States, and that's one of our things (as you know of course).

As far as aircraft utilization, we can get more aircraft in short order if we need them. I've heard our new route guy has said we will need 5 more to fully implement the route structure he has planned.

This isn't aimed only at you Andy, but it is funny how FI CEO's say something needs to change because you are going to go out of business. Then something changes and of course it is the wrong move...Oh well. Also, I have read other speculation on other sights. How can you possibly know what our investors and management are thinking? WE ARE A PRIVATE COMPANY! We are slowly coming into profitability (2 quarters in a row operational profit...first time ever...maybe a net quarter 4). With the general U.S. economy seeming to come back, I think we'll be fine. It may not be announced today, but there are a few huge things that will be instant game changers on the horizon. We'll see...maybe not and I will be on the street.

 

[LoveGun]

Also, the conflicting messages coming from management about new routes are because we had a shake-up in our revenue department. We have a new VP of revenue and he has a different vision for VA's route structure. To an outside observer it may look as if we choosing markets via dart board. However, our revenue master has a track record of bringing profitability to both Alaska Airlines and WestJet.

Keep hating if you must. You are arguing from a much easier position. After all, 9 out of 10 startup airlines fail. If we do shut our doors you'll have the "I told you so" rights that you so richly deserve. But, if VA makes it, I'll be a senior captain for a long long time. I'll be living it beautiful California and enjoying my 19 days off a month. It's a huge gamble, but so is burning years of one's life at stable yet soul crushing job. It's not like being an FO at a legacy has a less than cloudy future.

 

[Andy]

$99 million per year cash burn rate? Not exactly...

Arrrgh! Let me walk you through the numbers, including links to quarterly reports. I can only assume that this will be the first time many have read the quarterly reports.

3Q2011: $24M unrestricted cash on hand
Dec 2011: $150M debt facility from hedge funds
4Q2011: $160M unrestricted cash on hand
1Q2012: $111M unrestricted cash on hand
2Q2012: $82M unrestricted cash on hand
3Q2012: $75M unrestricted cash on hand

$24M + $150M - $75M = $99M cash burn rate in four quarters.

http://www.virginamerica.com/press-...rts-third-quarter-2011-financial-results.html
http://www.bizjournals.com/sanfranc...gin-america-raises-cash-cushion.html?page=all
http://www.virginamerica.com/press-...-quarter-and-full-year-financial-results.html
http://www.virginamerica.com/press-...erica-reports-first-quarter-2012-results.html
http://www.virginamerica.com/press-release/2012/virgin-america-2012-second-quarter-results.html
http://www.virginamerica.com/press-...ica-2012-third-quarter-financial-results.html

The vast majority of VA's losses are due to us not paying down our debt. The interest owed our creditors stacks up -- hence the large net losses. This is bad, but it is not catastrophic. The number to watch is operating profit. If VA can make an operating profit consistently, then we can IPO and our owners/ investors will trade debt for equity.

While I agree that operating profit is a key metric, it doesn't matter if you run out of cash because you can't turn a net profit.

I have no doubt that EWR happened because they have been working on it for 5 years and it just happened when it happened. They weren't going to not go now because of our lack of aircraft. As far as SJC, I think it is good and bad. I would have rather seen another completely new market, but maybe they feel this one will mature quickly because it is an already established market. Also, it will be nice to have a close divert airport (with our staff there) for us being in SFO. Also, like EWR, apparently it has been highly requested by the people that fly on our airline. It is close to the tech hub of the United States, and that's one of our things (as you know of course).

As far as aircraft utilization, we can get more aircraft in short order if we need them. I've heard our new route guy has said we will need 5 more to fully implement the route structure he has planned.

This isn't aimed only at you Andy, but it is funny how FI CEO's say something needs to change because you are going to go out of business. Then something changes and of course it is the wrong move...Oh well. Also, I have read other speculation on other sights. How can you possibly know what our investors and management are thinking? WE ARE A PRIVATE COMPANY! We are slowly coming into profitability (2 quarters in a row operational profit...first time ever...maybe a net quarter 4). With the general U.S. economy seeming to come back, I think we'll be fine. It may not be announced today, but there are a few huge things that will be instant game changers on the horizon. We'll see...maybe not and I will be on the street.

Bri, my personal take on VX is that it should have been based out of SJC, not SFO. The product would likely be much better received among the Silicon Valley crowd, as I think they're less price sensitive and more into being 'trendy'. But that's my personal gut feeling; not based on any market studies.

As far as operating profits, VX has had operating profits in the following quarters: 3Q2012, 3Q2011, 3Q2010, 2Q2010, 3Q2009. The string of two consecutive quarters with an operating profit occurred in 2010. VX had a $4M operating loss in 2Q2012. IF VX has an operating profit in 4Q2012, that will also be two consecutive quarters of operating profits - however, Q4 has always been a weak quarter for VX.

 

[bri5150]

Also, the conflicting messages coming from management about new routes are because we had a shake-up in our revenue department. We have a new VP of revenue and he has a different vision for VA's route structure. To an outside observer it may look as if we choosing markets via dart board. However, our revenue master has a track record of bringing profitability to both Alaska Airlines and WestJet.

Keep hating if you must. You are arguing from a much easier position. After all, 9 out of 10 startup airlines fail. If we do shut our doors you'll have the "I told you so" rights that you so richly deserve. But, if VA makes it, I'll be a senior captain for a long long time. I'll be living it beautiful California and enjoying my 19 days off a month. It's a huge gamble, but so is burning years of one's life at stable yet soul crushing job. It's not like being an FO at a legacy has a less than cloudy future.

I love this post. This is right on the money!!

 

[bri5150]

While I agree that operating profit is a key metric, it doesn't matter if you run out of cash because you can't turn a net profit.



Bri, my personal take on VX is that it should have been based out of SJC, not SFO. The product would likely be much better received among the Silicon Valley crowd, as I think they're less price sensitive and more into being 'trendy'. But that's my personal gut feeling; not based on any market studies.

As far as operating profits, VX has had operating profits in the following quarters: 3Q2012, 3Q2011, 3Q2010, 2Q2010, 3Q2009. The string of two consecutive quarters with an operating profit occurred in 2010. VX had a $4M operating loss in 2Q2012. IF VX has an operating profit in 4Q2012, that will also be two consecutive quarters of operating profits - however, Q4 has always been a weak quarter for VX.

Andy...while your research is impressive, it is also a bit creepy. What is your tie to Virgin America? I just go by what I was told when I was hired...VX had one profitable quarter (not sure if it was net or operating). Either way...creepy stalking .

As far as SJC as first base...I couldn't agree more. I actually texted that to my sim partner last night. :beer:

One other thing...I admit I am not a business guy. This is my thought and maybe I am completely wrong. The difference between operating and net profit is interest payments. Shouldn't our investors own our interest payments? That said, operating profit is actually a net for our investors? Again...not good at business here, just thinking logically.

 

[Andy]

Andy...while your research is impressive, it is also a bit creepy. What is your tie to Virgin America? I just go by what I was told when I was hired...VX had one profitable quarter (not sure if it was net or operating). Either way...creepy stalking .

As far as SJC as first base...I couldn't agree more. I actually texted that to my sim partner last night. :beer:

One other thing...I admit I am not a business guy. This is my thought and maybe I am completely wrong. The difference between operating and net profit is interest payments. Shouldn't our investors own our interest payments? That said, operating profit is actually a net for our investors? Again...not good at business here, just thinking logically.

I majored in Economics. I read a ton of quarterly reports - more than simply airline financial reports. This is the first time someone working for a company has called my comments about their financial reports as 'creepy'.
Personally, I find it odd how few people know how to read financial reports. How can you possibly invest if you don't know how to read a financial report???


Operating profits = EBIT ... earnings before interest and taxes.
There are other metrics used to measure a company's 'profitability', depending on how many items you want to exclude.
EBITDA = earnings before interest, taxes, depreciation, and amortization.
EBITDAR = earnings before interest, taxes, depreciation, amortization, and rent/restructuring costs.
EBITDARM = EBITDAR + management fees.
The longer the acronym, the less value I personally place in the number. Garbage in, garbage out.
Net income (loss) is the bottom line. It accounts for all additions and debits from the balance sheet. However, you still have to be careful because there can be a lot of garbage thrown into the number. You need to do a complete reading of the earnings report to find if there were accounting tricks used to arrive at the net income number. That kind of stuff is usually hidden in the footnotes.
Since VX isn't a public company, their earnings reports are very opaque; you don't know how much garbage is hidden. I don't know how much of their interest charges is paying back investors (I suspect very, very little) and how much is interest on lines of credit and other loans to the company. I'd be willing to bet that the bulk of the interest is on borrowed money from financial institutions.
As a simple example of how opaque VX's earnings reports are, there aren't even assets and liabilities listed.



As for the comments about John MacLoed, I've yet to figure out how he's earned this 'walk on water' reputation. During his tenure at both Alaska and Westjet, there appears to have been no huge change in company profitability either positive or negative.


Finally, I have no ties to Virgin America. I have no love nor hate for the company; I simply do the math and base my opinions on what the calculator tells me.
I've read that VX's product is great. I've never flown them so I have no impression one way or the other. There have been plenty of companies that have received high praise but gone out of business in the past. You can't sell your products for a loss forever - at some point, you have to charge your customers enough to cover your expenses. 5 years is a long time to still have net losses.

 

[GogglesPisano]

It's not like being an FO at a legacy has a less than cloudy future.

Decent coin. Decent meals. European layovers. Massive retirements around the corner. I like these clouds.

 

[fandango]

How about interview reports from last week........anyone?

 

[Flyer1015]

YOUR CEO stated that VX was going to stop opening additional stations because he claimed that the cost of opening new stations was the reason why VX was losing money (high cost of opening new destinations). So what's he done since that announcement? Announced that EWR and SJC will be new destinations for VX. I never bought the argument that opening new stations was VX's problem; VX's problem is that you guys are trying to sell conspicuous consumption in a Walmart world.

As to your second rebuttal - aircraft utilization - let's break down the numbers for VX's new proposed service.
SJC-LAX @4 RTs/day. That's a minimum of 3: 00 x 4 = 12 hours.
LAX-LAS @3 RTs/day. That's a minimum of 2:30 x 3 = 7:30 hrs.
LAX/SFO-EWR @6 RTs/day. That's a minimum of 11: 00 x 6 = 66 hours.
12 + 7:30 + 66 = 85:30/day additional flying.
VX is currently flying their aircraft more than 12 hours/day. There isn't much room for flying the aircraft additional hours. What you're suggesting is that VX will be able to get more than an additional 1:30/day out of their aircraft. While it's not mathematically impossible, I don't expect that you'll get high load factors on the multiple 2-4 AM departures that would be required to get that high a utilization rate.

Where'd I get the $100M figure? Simple math. The latest four quarters show a $99M cash burn rate. The problem is that VX's numbers have been deteriorating since 2010. I realize that some of you think that VX has turned a corner and the cash burn is suddenly going to stop but I see nothing but continued poor decisions at VX. The LAX Elevate Club is your management's latest plan to flush more cash down the crapper.

Have I seen the 4Q numbers? Yes. I've seen the 2008, 2009, 2010, and 2011 4Q numbers. And from those and other quarterly numbers, VX has a track record. And the pattern of best to worst quarters is: 3Q, 2Q, 4Q, and 1Q. So even if VX had a 'great' 4Q quarter and only burned $10M in cash, it won't matter much because 1Q has always been VX's bloodbath quarter. Absent additional investment capital, VX will be out of cash before they turn a wheel in SJC.



I find it rather humorous that someone who, by all appearances, hasn't even read a VX quarterly report, much less know when VX has traditionally released them, would mock someone who has actually read VX's quarterly reports.

Bolded portion........ what the hell are you talking about? If you don't work here, how would you know what he said. I distinctly remember during that all hands call when the growth slowdown was announced, he was asked did it also mean our city growth would be put on hold? He said NO, that we would likely be adding a couple cities over 2013. I heard that myself, and it is showing as fact (EWR, LAS-LAX, and SJC-LAX). You have made a false statement, and without working here, I don't know where you are quoting our CEO saying directly that we would not grow into new markets. That is FALSE!

You don't work here, nor have you worked here. I could understand if you were a legacy furloughee at VX and went back, and therefore feel like you're vested interest in VX. I've asked you before what your point is in regards to these highly detailed VX posts. You previously claimed you had none. Now, you made one:

You guys need someone willing to drop another $100M in order to keep the doors open for another year, not simply playing musical chairs with your flights. ... these new SJC flights (along with the EWR and LAS ones) will mean that other routes will have to be cut since you're only taking delivery of one aircraft in 2013.

So about how this. If VX makes it through 2013, without getting another 100 million, can you tone it down on your VX rhetoric? That's a whole lot of math for an economics major airline pilot.

What I don't understand is if you don't work here, have not worked here in the past, and don't want to work here in the future, why do you have so much vested interest in this place? No matter, I'm taking you up on your prediction. We'll see if in 2013 VX closes its doors unless it receives "another 100 million." Your words have been cast.

 

[jonjuan]

Bolded portion........ what the hell are you talking about? If you don't work here, how would you know what he said. I distinctly remember during that all hands call when the growth slowdown was announced, he was asked did it also mean our city growth would be put on hold? He said NO, that we would likely be adding a couple cities over 2013. I heard that myself, and it is showing as fact (EWR, LAS-LAX, and SJC-LAX). You have made a false statement, and without working here, I don't know where you are quoting our CEO saying directly that we would not grow into new markets. That is FALSE!

You don't work here, nor have you worked here. I could understand if you were a legacy furloughee at VX and went back, and therefore feel like you're vested interest in VX. I've asked you before what your point is in regards to these highly detailed VX posts. You previously claimed you had none. Now, you made one:



So about how this. If VX makes it through 2013, without getting another 100 million, can you tone it down on your VX rhetoric? That's a whole lot of math for an economics major airline pilot.

What I don't understand is if you don't work here, have not worked here in the past, and don't want to work here in the future, why do you have so much vested interest in this place? No matter, I'm taking you up on your prediction. We'll see if in 2013 VX closes its doors unless it receives "another 100 million." Your words have been cast.

Simmer down, Francis. You're at the next SWA.

 

[Cornelius]

SJC is a bad idea, South West is there. There's a reason why LCCs avoid South West presence.

 

[Flyer1015]

I never said VX is the next SWA. It's just that the analysis provided by some pilots here is stretched from the truth, things like attributing comments to a CEO that never made those comments.

 

[NEDude]

Andy, since you are an economics 'guru' perhaps you can explain how private corporate financials are different from public corporate financials.

I do not claim to be an expert, but I do know the following - Virgin America has been predicted to be on the verge of going out of business for five years now. Some very well respected airline analysts predicted our imminent demise three years ago. Yet here we are nearly twice as big. If the well respected airline analysts, who get paid a lot of money to be experts, who provide consulting to media and trade groups, have been wrong for the past three to five years, how are we supposed to put credible stock in the opinion of some anonymous person on an aviation message board? The simple fact Andy is that you have no clue as to what the real financial position of Virgin America is. Just like all of the other so-called 'experts', you think you know, but in reality have no clue. Which is why you have all been wrong about Virgin America's imminent demise for several years now.

Our current CEO has made several bad decisions, no doubt about it, and this company does stupid things quite regularly. But your analysis, like every other analysis on here, is worthless.

 

[Andy]

Bolded portion........ what the hell are you talking about? If you don't work here, how would you know what he said. I distinctly remember during that all hands call when the growth slowdown was announced, he was asked did it also mean our city growth would be put on hold? He said NO, that we would likely be adding a couple cities over 2013. I heard that myself, and it is showing as fact (EWR, LAS-LAX, and SJC-LAX). You have made a false statement, and without working here, I don't know where you are quoting our CEO saying directly that we would not grow into new markets. That is FALSE!

You don't work here, nor have you worked here. I could understand if you were a legacy furloughee at VX and went back, and therefore feel like you're vested interest in VX. I've asked you before what your point is in regards to these highly detailed VX posts. You previously claimed you had none. Now, you made one:



So about how this. If VX makes it through 2013, without getting another 100 million, can you tone it down on your VX rhetoric? That's a whole lot of math for an economics major airline pilot.

What I don't understand is if you don't work here, have not worked here in the past, and don't want to work here in the future, why do you have so much vested interest in this place? No matter, I'm taking you up on your prediction. We'll see if in 2013 VX closes its doors unless it receives "another 100 million." Your words have been cast.

How about you just put me on ignore?

As to Cush's comments about not opening new stations, he was quoted:

Virgin America has launched five new routes in the past year. He said he expects the company to open between two and four new cities over the next few years, a more moderate pace of expansion.

Source: http://online.wsj.com/article/SB10001424127887323551004578122873335935136.html

 

[Andy]

Andy, since you are an economics 'guru' perhaps you can explain how private corporate financials are different from public corporate financials.

I do not claim to be an expert, but I do know the following - Virgin America has been predicted to be on the verge of going out of business for five years now. Some very well respected airline analysts predicted our imminent demise three years ago. Yet here we are nearly twice as big. If the well respected airline analysts, who get paid a lot of money to be experts, who provide consulting to media and trade groups, have been wrong for the past three to five years, how are we supposed to put credible stock in the opinion of some anonymous person on an aviation message board? The simple fact Andy is that you have no clue as to what the real financial position of Virgin America is. Just like all of the other so-called 'experts', you think you know, but in reality have no clue. Which is why you have all been wrong about Virgin America's imminent demise for several years now.

Our current CEO has made several bad decisions, no doubt about it, and this company does stupid things quite regularly. But your analysis, like every other analysis on here, is worthless.

I never claimed to be an economics guru. I just read the numbers and the signs on the wall. And everything indicates that VX needs some more cash to survive because they aren't showing any signs of getting close to breakeven yet.
As for anyone predicting the demise of your carrier, the main reason why I started following VX's plight is because your CEO keeps appearing on CNBC - the only airline CEO who's got more airtime on CNBC in this last year than Cush is Barger. That, and the $150M loan last December caught my eye.

The difference between a public and private company? I've already spelled that out in previous posts. If you are unable to figure out that from what I've already written, you're beyond help.

This board is for open discussion; if you don't like it, feel free to put me on ignore. And keep drinking the red koolaid.

 

[NEDude]

I never claimed to be an economics guru. I just read the numbers and the signs on the wall. And everything indicates that VX needs some more cash to survive because they aren't showing any signs of getting close to breakeven yet.
As for anyone predicting the demise of your carrier, the main reason why I started following VX's plight is because your CEO keeps appearing on CNBC - the only airline CEO who's got more airtime on CNBC in this last year than Cush is Barger. That, and the $150M loan last December caught my eye.

The difference between a public and private company? I've already spelled that out in previous posts. If you are unable to figure out that from what I've already written, you're beyond help.

This board is for open discussion; if you don't like it, feel free to put me on ignore. And keep drinking the red koolaid.

If red kool aid is stating the obvious fact that you and the other so-called experts have been regularly way off base as to the true inner-financial workings of Virgin America, then I am guilty of drinking as charged. I fully acknowledge the fact that VX management has made boneheaded decisions and the company cannot continue as it has been.

But clearly you have no clue as to what is going on at VX. You do not know the interest rates on the debt. You do not know who all the investors are or what kind of return on investment they are getting. You do not know what their thresholds are for throwing in the towel. Until you know all of those things you are just blindly throwing darts. I do not claim to know any of those things either, only that we are still around and twice as large as we were when I was reading of our imminent demise over three years ago. If we survive, great. If we fail, well I have a ton of other options out there and will move on, just like I have six times before.

 

[Andy]

NEDude, either VX finds additional cash, they become profitable, or they go out of business. You guys seem to think that things have turned around. Maybe; we'll have to see Q4 and Q1 numbers - Q1 is more critical than Q4 numbers. Their Q3 numbers certainly weren't good - they increased their cash burn rate year over year.
Perhaps they got some aircraft deposits refunded that will allow them to keep going for a while longer.
Perhaps they'll get another round of funding.
Perhaps they were able to turn a net profit (or even a small net loss) in Q4, followed by a small net loss in Q1.

I'll congratulate you guys if the numbers turn around, but right now VX looks even more screwed up than United. And I see nothing from VX to turn things around.

 

[Flyer1015]

How about you just put me on ignore?

As to Cush's comments about not opening new stations, he was quoted:

Quote:
Virgin America has launched five new routes in the past year. He said he expects the company to open between two and four new cities over the next few years, a more moderate pace of expansion.

Can you read? Read what that statement says. It says "open between two and four cities over the next few years." And you took that to mean that the CEO said no more city expansion? Do they not require English reading comprehension for Economic majors?

 

[Flyer1015]

NEDude, either VX finds additional cash, they become profitable, or they go out of business. You guys seem to think that things have turned around. Maybe; we'll have to see Q4 and Q1 numbers - Q1 is more critical than Q4 numbers. Their Q3 numbers certainly weren't good - they increased their cash burn rate year over year.
Perhaps they got some aircraft deposits refunded that will allow them to keep going for a while longer.
Perhaps they'll get another round of funding.
Perhaps they were able to turn a net profit (or even a small net loss) in Q4, followed by a small net loss in Q1.

I'll congratulate you guys if the numbers turn around, but right now VX looks even more screwed up than United. And I see nothing from VX to turn things around.

Don't change your words now. I already got you quoted saying VX will need $100 million infusion to last another year, 2013. We'll see if VX lasts through 2013, and how it does it.

 

[gearjockey]

NEDude, either VX finds additional cash, they become profitable, or they go out of business. You guys seem to think that things have turned around. Maybe; we'll have to see Q4 and Q1 numbers - Q1 is more critical than Q4 numbers. Their Q3 numbers certainly weren't good - they increased their cash burn rate year over year.
Perhaps they got some aircraft deposits refunded that will allow them to keep going for a while longer.
Perhaps they'll get another round of funding.
Perhaps they were able to turn a net profit (or even a small net loss) in Q4, followed by a small net loss in Q1.

I'll congratulate you guys if the numbers turn around, but right now VX looks even more screwed up than United. And I see nothing from VX to turn things around.

Andy:

I cannot quite recall, but weren't you the one illustrating the Airtran "death spiral" financing back in 2009? Do you draw any parallels to the Airtran situation and V-America? I'm not sure how it's all going to work out for Virgin America but it seems they have a lot of believers so they must have something over there.