Virgin America expands capacity "rationally", targeting unit costs below Southwest Airlines

Virgin America is assuring investors that its resumption of double digit capacity growth during 2016 is rational, and will allow the airline to keep costs flat or down, and unit revenue flat or growing. The airline's ultimate target is a unit cost level excluding fuel that is lower than Southwest Airlines. The airline's confidence in reaching its cost target is driven by its young fleet, forging favourable fleet financing arrangements and labour productivity.

Although Virgin America has provided guidance of unit revenue contraction in 3Q2015, it was one of the few US airlines to post gains in that metric during 1H2015. The company has concluded that it is shielded from some of the revenue headwinds its legacy competitors face, including foreign currency exposure.

As Virgin America resumes growth it anticipates adding one to two new markets per year, recently citing Sacramento and Denver as holes in its network. Although the airline continues to face pressure in its key transcontinental markets, Virgin America believes it is in a solid overall position to exploit new opportunities in the US market.