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San Francisco-based Virgin America is an American LCC, owned by VAI Partners and The Virgin Group. With its fleet of Airbus narrowbody aircraft and a popular low-cost product, Virgin America operates a network of services along the US West Coast, as well as trans-national services services between major cities on the East and West Coasts of the US. Virgin America's largest base is at San Francisco International Airport.
Location of Virgin America main hub (San Francisco International Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Virgin America fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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62 total articles
Virgin America is launching several new routes from its bases in San Francisco and Los Angeles in 1H2013 even as it cuts its annual growth rate from an annual average of 28% during the last three years to the mid-single digits during 2013 and takes delivery of just a single aircraft during the year. The routes are reflective of the airline’s network strategy during the last couple of years that entails inaugurating a mix of business and leisure markets that have ample existing service. Virgin America’s network tactics have been called into question during the last few years as profitability continues to elude the carrier; and it is not certain that the new routes it is introducing in 2013 will bring the airline closer to its first full-year profit.
New routes introduced by the carrier beginning in Apr-2013 and continuing through Jun-2013 are largely well-served by Virgin America’s main rivals United and American along with low-fare carriers JetBlue and Southwest. One of Virgin America’s most interesting moves is its entry into the crowded Los Angeles-San Jose market. It is an interesting experiment for the carrier as San Jose Norman Mineta Airport is just 49km away from its largest base and headquarters in San Francisco, from which Virgin America offers numerous daily flights to Los Angeles. With so many carriers already serving the short-haul market, it is uncertain if Virgin America can steal or stimulate enough traffic on the route to achieve sustained profitability.
United ends 2012 as world's biggest airline, Emirates third. Turkish and Lion Air the biggest movers
United Airlines, following its merger with Continental, has ended 2012 as the world's biggest airline measured by available seat kilometres for the current week, ahead of second placed Delta, whose capacity fell 0.3% year on year, according to Innovata. Fast growing Dubai-based carrier Emirates is the world's third biggest airline by this measure, and could be in second place by the end of 2013 if the past year's growth rates are maintained.
Southwest Airlines remains easily the largest LCC, while Lion Air and Jetstar have each climbed the LCC top 10, to sixth and seventh places respectively, overtaking Westjet. Atlanta Airport (just) remains the world's largest, ahead of Beijing Capital Airport, in terms of seat throughput for the week, but this ranking seems certain to reverse in 2013.
The biggest movers in the overall World Top 50 list include Turkish Airlines, which jumped seven places to rank 15th globally, while Indonesian carrier Lion Air vaulted eight places to enter the global Top 40 for the first time. Iberia and India's Jet Airways fell four and seven places in the 2012 rankings, respectively.
Global Airline Alliances collectively grew capacity at higher than the world rate, with SkyTeam expanding fastest of the three majors, although Star Alliance remains easily the largest.
During one of the most profitable quarters of the year for North American carriers, Virgin America continued to record a string of quarterly losses, watching its 3Q2012 net loss widen year-over-year from USD3 million to nearly USD13 million. In its latest effort to stem its continuous losses for the last five years, the carrier has now embarked on plans to cut its orders for current generation Airbus narrowbodies and defer deliveries of the A320neo as a means to slow its annual capacity growth to the single digits during the next several years versus a 73% expansion during the last two years.
While the changes to its Airbus orders supplies Virgin America breathing room with its capital commitments, and its new-found slow-growth mode gives some of the new markets it has introduced during the last couple of years time to mature, it is not clear how Virgin America will undertake one of the single biggest challenges it faces in achieving profitability – building and maintaining a viable network to compete effectively against carriers that are cleaning up their own balance sheets and posting consistent profits.
After recording the latest in a string of quarterly losses, Virgin America has declared its intent to slow growth as part of a strategy to achieve profitability, which has eluded the carrier throughout its five-year existence. Earlier predictions by senior management of recording an operating profit for 2012 seem to be fading as Virgin America posted a USD53 million operating loss for 1H2012. The easing of its rapid growth could be a last-ditch effort to gain financial strength as patient investors wait for returns.
Virgin America has only recorded a single quarter of profitability – 3Q2010 – when the carrier recorded net income of USD7.5 million. It recorded a USD100 million net loss in 2011, when the majority of its US carrier counterparts attained profitability as oil prices neared the record highs set in 2008.
During 2Q2012, the carrier narrowed its operating loss to USD4 million from USD6 million the year prior, but its net loss widened by 46% to USD32 million. For 1H2012, Virgin America's net loss widened by 64% from USD66 million to USD108 million while its operating loss widened by 48% year-over-year from USD35 million to USD53 million.
Emirates is close to overtaking American Airlines and becoming the third largest airline by available seat kilometres (ASKs) after the Dubai-based carrier's massive 19% increase in capacity over the last year. Emirates' current capacity is close to 30% above levels of just two years ago, according to Innovata. Over the same period, American has cut capacity by about 8% while larger rivals United Airlines and Delta Air Lines have slashed ASKs by over 16%, according to Innovata. Interestingly, were American Airlines to combine with US Airways it would become the world's biggest airline - some 4% larger than Delta by ASKs based on Innovata capacity figures for Aug-2012.
The other big movers over the past two years include Ryanair, which has leapfrogged China Southern and US Airways into the Top 10, and Turkish Airlines, which has soared into 17th position (from 27th two summers ago) thanks to an astonishing 52% increase in ASKs. easyJet has also moved up several places to be just outside the Top 20, while Japan's ANA and JAL have fallen outside the top 20 grouping.
Alaska Airlines’ aggressive push into Hawaii after the nearly overnight demise of Aloha Airlines and ATA in 2008 appears to be leveling off as the carrier has determined that the rapid growth it has engineered to the islands will slow as the service gaps created by the abrupt exodus of those carriers have largely been filled. At the same time the carrier is seeing some competitive pressure at its Portland hub while taking advantage of a less competitive market with the addition of new service from San Diego.
Alaska expects its service to Hawaii to account for about 20% of its supply in 2012, a 13 ppt jump from the 7% of its flights dedicated to Hawaii in 2009. The carrier has adopted a strategy of launching service to Hawaii from US markets that do not have a large service footprint to the islands, and as a result has shielded itself from competition on those routes from mainland US carriers. At the end of 2011 Alaska estimated that more than 60% of its Hawaiian markets were not served by other carriers, driven by the carrier’s strategy to largely shun Honolulu in favour of direct flights to other markets in Hawaii. The carrier does offer flights to Honolulu from its Anchorage, Portland and Seattle hubs, and from the California cities of Oakland, San Jose and San Diego. It also serves Honolulu from Bellingham, Washington. Alaska competes with Hawaiian Airlines in four of those markets – San Jose, San Diego, Portland and Seattle.
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