Virgin America’s continued weak financials warrant close scrutiny of its network

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.