Virgin America Reports First Quarter 2014 Financial Results

Virgin America today reports its financial results for the first quarter of 2014. The airline significantly narrowed its net loss from the same period in 2013 with a 51.8 percent year-over-year improvement.

First Quarter 2014 Financial Highlights

• Operating Revenue: Total operating revenue of $313.4 million, an increase of 4.0 percent over the first quarter of 2013.
• Revenue per Available Seat Mile (RASM): RASM increased 0.9 percent, to 11.28 cents. Year-over-year RASM growth was impacted by the Easter and Passover travel peaks shifting to April in 2014 (in 2013, these holidays fell earlier in the year), as well as a more than four-fold increase in the percentage of cancelled flights from the year earlier period due to severe winter weather in 2014 - including a significant number of cancellations during the busy, high-RASM Presidents' Day holiday travel period.
• Cost per Available Seat Mile (CASM): Total CASM increased 0.2 percent, to 11.76 cents. CASM excluding fuel costs increased 2.4 percent year-over-year, to 7.59 cents. CASM was negatively impacted by the high level of cancellations, as well as a 6.9 percent decrease in average stage length.
• Operating Loss: First quarter 2014 operating loss of $13.1 million was a $1.9 million improvement over Virgin America's operating loss in the year prior. Operating margin improved by 0.8 percent year-over-year.
• Net Loss: $22.4 million net loss for the quarter, compared to a net loss a year ago of $46.4 million, resulting in a $24.0 million year-over-year improvement.
• Capacity: Available seat miles (ASMs) increased 3.0 percent year-over-year. The airline ended the quarter with 53 aircraft.
• Liquidity: Unrestricted cash was $132.9 million as of March 31, 2014, an increase of $74.8 million since March 31, 2013.

Executive Commentary

"Given our network's focus on transcontinental flying to the East Coast and with 30 percent of our revenue generated by New York markets alone, we bore the brunt of this year's winter storms with a significant increase in cancellations. Yet despite the challenging operating and financial environment brought on by the severe winter weather and a shift in holiday travel, Virgin America improved its year-over-year net results in the first quarter," said David Cush, Virgin America's President and Chief Executive Officer. "With our first full year of net income in 2013, this marks the sixth straight quarter that we have delivered improved year-over-year financial results. In addition, our continued sweep of the major travel awards remains a testament to the work of our 2,800 teammates who consistently deliver the best product in the skies - despite the tough operating conditions for the quarter."

In March, the California-based airline reported fourth quarter results and its first-ever full year profit in 2013, with a net income of $10.1 million, an improvement of $155.5 million over 2012. Total operating revenue for 2013 was $1.4 billion, a $91.8 million increase and 6.9 percent improvement over 2012. Virgin America achieved the highest year-over-year percentage increase in RASM of all major U.S. airlines in 2013.

Acquisition of Strategic Assets

As of the first quarter of 2014, Virgin America had finalized the purchase of slot assets at Washington Reagan National Airport (DCA) and at New York's LaGuardia Airport (LGA) that became available as part of the U.S. Department of Justice (DOJ) settlement agreement resolving American Airline's merger with US Airways. With the further acquisition of new gates at Dallas' Love Field (DAL) which were made available in the same settlement process and with the support of Dallas consumers and local leaders, the airline will launch four new daily nonstop flights from DAL to LGA, three daily nonstop flights from DAL to DCA, and three daily nonstop flights from both Los Angeles International Airport (LAX) and San Francisco International Airport (SFO) to DAL as of October 2014. These acquisitions will allow Virgin America to significantly strengthen its network. The airline will be the only carrier at Love Field to offer a consistent, upscale product on every flight - with three classes of service, WiFi, in-seat power outlets, confirmed seating and touch-screen seatback entertainment available for every guest. Virgin America will be the second low-cost airline to serve all three major New York-area airports. In addition, the airline closed and funded a $40.0 million financing facility with two major banks early in the second quarter of 2014 to finance these slot purchases and further increase unrestricted cash.

Operational Highlights

Key milestones achieved in the first quarter of 2014:

• Virgin America launched its new Visa Signature® Credit Card and a new Virgin America Premium Visa Signature® Card in partnership with Alliance Data Systems.
• Virgin America teamed up with the Here on Biz app to launch the first-ever in-flight social network.
• The Company announced a new enhanced First Class menu and service, which included the airline's custom artisanal ice cream flavor produced by San Francisco-based Humphry Slocombe.
• The airline announced expanded service to Austin-Bergstrom International Airport from SFO.
• For the second straight year, Virgin America was named the top-ranked airline in the Airline Quality Rating (AQR), an annual analysis of airline performance conducted by Wichita State University and Embry-Riddle Aeronautical University. Based on publicly reported data all major carriers must submit to the U.S. Department of Transportation, the AQR provides a comparative ranking of how airlines stack up on key metrics important to consumers including: on-time performance, customer complaints, denied boarding and mishandled bags. Last year, Virgin America topped the same ranking in the first year it was eligible for the AQR, which only ranks airlines that make up at least 1 percent of domestic scheduled-service revenue.

Virgin America is announcing these financial results in advance of the Department of Transportation quarterly reports.