Virgin America posts 25% increase in losses

Virgin America posted a USD29.5 million operating loss in the first quarter, despite its unchanged operating margin at 14.7%, the airline reported. The loss came on a 37% revenue increase to USD201 million in the first quarter. Its net loss jumped 25.5% to USD44.5 million

The company cited fuel costs and rapid growth for the headwinds although it reported a 11.6% increase in total revenue per available seat mile during 1Q-2011 to 9.25 cents compared to the 2010 first quarter. Guest revenue per available seat mile rose 13.2% to 8.43 cents while yield also jumped 13.2% to 11.13 cents.

The RASM increase, it said, came a a time when domestic industry experienced a 10% RASM growth. Virgin said same store RASM grew 20% year on year while the scheduled capacity increased by 23% compared to the domestic industry’s average capacity increase of only 1% for the period.

“Despite the financial challenges of growth and rising fuel costs in the first quarter, we remain pleased with our revenue performance and overall progress as a young airline in a significant growth phase,” said President and CEO David Cush. “While we are disappointed that our operating results fell short of our expectations primarily due to fuel prices, we are encouraged that we were able to recover over half of the sharp fuel increase through revenue gains. Our strong sales performance and recent expansions to major business and leisure destinations such as Dallas-Fort Worth and Chicago forecast a strong overall picture for 2011 and beyond.” 

Rising costs were driven by its investment in growth and fuel, said the airline, reducing first quarter operating results by USD13 million.  The company, which is privately held but reports out its quarterly results, cited idle capacity, primarily employees in training and new aircraft modifications.

Cost per available seat mile rose 11.6% to 10.61 cents while CASM ex fuel rose 5.3% to 6.77 cents. ASMs rose 22.8% to 2.1 billion while fleet utilisation dropped 4% to 12 hours daily. Average fare dropped 0.2 points to USD182.46. Total operating expenses rose 36.9% to USD230.6 million

Rising fuel accounted for 30% of the airline’s fuel cost increases year-over-year while the cost per gallon impact of fuel increased operating expense by USD17 million over the increase attributed to the airline’s growth.  Crude oil hedges offset USD4 million of the airline’s overall fuel cost increase.  A significant portion of the rise in jet fuel costs is due to the record high crack spreads experienced in February and March, it said.

It will continue its aggressive growth rate through the second quarter 2012 when its fleet will increase from the current 35 aircraft to 52 aircraft. The growth to 35 aircraft in the first quarter was, in itself, a 25% increase from 1Q-2010.

The airline reported significant year-over-year increases in traffic, bookings and average fares in the second quarter of 2011. Load factors during the quarter dropped 0.2 points to 76% during the quarter on a 23% increase in ASMs. New markets represented all of the airline’s capacity growth in the quarter and made up 19% of the airline’s total capacity in the quarter. Stage-length adjusted guest unit revenue was up 17% versus the year-earlier quarter.  Average fares increased by 22% over the year earlier quarter. The airline ended the quarter with USD25 million in unrestricted cash and USD54 million in total liquidity.

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