Virgin America cites a positive performance for Hawaii while pricing in Dallas continues to suffer

Although capacity has recently decreased in the Dallas market pricing remains under pressure, which has triggered Virgin America to trim some capacity on its routes from Dallas Love Field, starting in 2Q2016. For the last year, Dallas has been mired in outsized capacity growth and lower pricing. But Virgin America has concluded that the pressure it is experiencing is no longer driven by a supply and demand equation, but rather a decision by its competitors to trade yield for load factor. Virgin America is opting to reduce its exposure to the depressed fare environment instead of engaging in similar behaviour.

Virgin America plans to deploy some of the capacity that it is cutting from Dallas in 2016 to new flights from its Los Angeles base to Honolulu and Maui. Those new routes follow the debut of service to those Hawaiian markets from the company's San Francisco base in late 2015. Despite entering routes to Hawaii that are already heavily populated by other airlines, Virgin America is pleased with its performance in those markets.

The airline is forecasting a 3% to 5% drop in passenger unit revenue for 1Q2016, while capacity for the full year of 2016 is growing 14% to 16%. Aside from the situation at Dallas, Virgin America remains optimistic about the performance of its network. However, similarly to the state of most US airlines, there will likely be no positive PRASM traction for the airline until 2H2016 at the earliest.