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Virgin America 4 Years Later - CEO Talks  
User currently offlineLAXintl From United States of America, joined May 2000, 26026 posts, RR: 50
Posted (3 years 3 months 6 days 23 hours ago) and read 13635 times:

Virgin America which operates 39-aircraft, this month celebrated its 4-year anniversary.
David Cush its President and CEO had a Q&A interview with Silicon Valley’s Mercury News. Questions about why a SF HQ, top route, customer service, and the environment were covered.

Article:
http://www.mercurynews.com/business/ci_18717348

One thing mentioned by the CEO peaked my interest - he states a lot of their client base is:
"business travelers and tech-savvy urban dwellers, and it skews toward people with higher disposable incomes."
I've long suspected VX as having one of the more affluent client bases amongst US domestic airlines.


From the desert to the sea, to all of Southern California
49 replies: All unread, showing first 25:
 
User currently offlinecubsrule From United States of America, joined May 2004, 23225 posts, RR: 20
Reply 1, posted (3 years 3 months 6 days 23 hours ago) and read 13590 times:

Quoting LAXintl (Thread starter):
I've long suspected VX as having one of the more affluent client bases amongst US domestic airlines.

Given their route map, wouldn't it be more surprising if they didn't?



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineERJ170 From United States of America, joined Apr 2004, 6784 posts, RR: 17
Reply 2, posted (3 years 3 months 6 days 23 hours ago) and read 13527 times:

Did Virgin America do like jetBlue did when they put out their list of cities they were interested in serving before their launch? Does anyone have that list? I would love to see what's on the list compared to where they are now..


Aiming High and going far..
User currently offlineikramerica From United States of America, joined May 2005, 21562 posts, RR: 59
Reply 3, posted (3 years 3 months 6 days 23 hours ago) and read 13447 times:

Yet they don't sell their seats at a profitable rate. I'm looking to go to NYC in two months from la and while other airlines have sold out their low fare buckets on the peak flights, and UA CO on all flights, VX still has the $318 fares on offer for all flights. One would think that business and upscale pax would pay more, especially on Friday and Sunday.


Of all the things to worry about... the Wookie has no pants.
User currently offlinecommavia From United States of America, joined Apr 2005, 11840 posts, RR: 62
Reply 4, posted (3 years 3 months 6 days 23 hours ago) and read 13426 times:

Quoting LAXintl (Thread starter):
One thing mentioned by the CEO peaked my interest - he states a lot of their client base is:
"business travelers and tech-savvy urban dwellers, and it skews toward people with higher disposable incomes."
I've long suspected VX as having one of the more affluent client bases amongst US domestic airlines.

Not surprising given VX's product and route network. The open question remains - at least in my mind - whether or not you can build an economically sustainable airline based largely on this niche market. Marketing to savvy urban dwellers with high incomes is definitely, on a per-person basis, economically attractive, but there aren't too many of those people in the U.S. (relative to the overall population), and those people are generally all concentrated in a very small group of markets.


User currently offlineLAXintl From United States of America, joined May 2000, 26026 posts, RR: 50
Reply 5, posted (3 years 3 months 6 days 23 hours ago) and read 13406 times:

Quoting cubsrule (Reply 1):
Given their route map, wouldn't it be more surprising if they didn't?

Not really - they fly tons of very competitive routes against carriers like JetBlue, SWA, and the legacies.

So I think its pretty good they have been able to coral a certain segment of desired demographic traveler towards them and not their competitors offerings.
Certainly the product helps, but their more niche and eclectic marketing seems to have worked in drawing seemingly more then their average share of upper income folks in.

Quoting ERJ170 (Reply 2):
Did Virgin America do like jetBlue did when they put out their list of cities they were interested in serving before their launch? Does anyone have that list? I would love to see what's on the list compared to where they are now..

Below is what they mentioned in their DOT filings back in 2007 as potential future destinations for consideration in addition to the initial 1st year launch cities of San Francisco, New York, Washington, DC, Los Angeles, San Diego and Las Vegas.

Atlanta
Austin
Baltimore
Boston
Charlotte
Chicago
Cincinnati
Cleveland
Dallas
Denver
Detroit
Fort Lauderdale
Fort Myers
Hartford
Houston
Indianapolis
Jacksonville
Kansas City
Miami
Milwaukee
Minneapolis
Nashville
Newark
New Orleans
Orlando
Philadelphia
Phoenix
Pittsburgh
Providence
Portland, Ore
Raleigh-Durham
Sacramento
Salt Lake City
San Antonio
San Jose, Calif.
Sarasota
Seattle
St. Louis
Tampa
West Palm Beach.



From the desert to the sea, to all of Southern California
User currently offlineScottB From United States of America, joined Jul 2000, 6808 posts, RR: 32
Reply 6, posted (3 years 3 months 6 days 22 hours ago) and read 13197 times:

Quoting LAXintl (Reply 5):
Not really - they fly tons of very competitive routes against carriers like JetBlue, SWA, and the legacies.

But in the very competitive short-haul routes, they are still unable to get their "people with higher disposable incomes" to pay more for their product -- or even as much as the competition can get.

Quote:
Part of it was the market: SFO was dominated by a high-cost legacy carrier (United), and in 2007 Southwest and JetBlue didn't have a lot of flights out of the airport.

Two key problems for VX: They likely believed that (1) Southwest would not return to SFO and (2) JetBlue would stay out of SFO & LAX, favoring OAK & LGB instead.

Quoting LAXintl (Thread starter):
David Cush its President and CEO had a Q&A interview with Silicon Valley’s Mercury News. Questions about why a SF HQ, top route, customer service, and the environment were covered.

Of course, nothing about when/if they'll ever make a profit.


User currently onlineMaverickM11 From United States of America, joined Apr 2000, 17786 posts, RR: 46
Reply 7, posted (3 years 3 months 6 days 22 hours ago) and read 13109 times:

Quoting ScottB (Reply 6):
Of course, nothing about when/if they'll ever make a profit.

Details . Their passengers have iPads. What more do you want.



E pur si muove -Galileo
User currently offlineLAXintl From United States of America, joined May 2000, 26026 posts, RR: 50
Reply 8, posted (3 years 3 months 6 days 22 hours ago) and read 12997 times:

Quoting ScottB (Reply 6):
But in the very competitive short-haul routes, they are still unable to get their "people with higher disposable incomes" to pay more for their product -- or even as much as the competition can get.

Well if you define short-haul routes of about 1-hour, here is how they do on such flying based on their average fare collected compared to OALs.

SFO-LAS
VX - $133.52
UA - $124.08
WN - $119.98
US - $104.99

SFO-LAX
VX - $114.01
UA - $113.50
AA - $104.39
WN - $103.49
DL - $87.49

SFO-SAN
UA - $117.52
VX - $111.48
WN - $108.00

SFO-SEA
UA - $158.00
AS - $149.99
VX -$141.48

Not bad compared to peers. They actually lead in two of the markets!



From the desert to the sea, to all of Southern California
User currently offlineEA CO AS From United States of America, joined Nov 2001, 13704 posts, RR: 61
Reply 9, posted (3 years 3 months 6 days 22 hours ago) and read 12985 times:
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Quoting MaverickM11 (Reply 7):

Quoting ScottB (Reply 6):
Of course, nothing about when/if they'll ever make a profit.

Details . Their passengers have iPads. What more do you want.

LOL! What made me laugh even more is the photo on that page referring to David Cush's appointment to the BOD of a local non-profit organization. Especially because his own company appears to be one so far...  



"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan
User currently offlineScottB From United States of America, joined Jul 2000, 6808 posts, RR: 32
Reply 10, posted (3 years 3 months 6 days 22 hours ago) and read 12941 times:

Quoting LAXintl (Reply 8):
SFO-LAS
VX - $133.52

Source? The Consumer Air Fare Report shows them as having the lowest average SFO-LAS fare for three out of four quarters in 2010.

Quoting LAXintl (Reply 8):
SFO-SAN
UA - $117.52
VX - $111.48

Again, source? Consumer Air Fare Report shows them as having the lowest fare on this route for all four quarters of 2010.

Quoting LAXintl (Reply 8):
They actually lead in two of the markets!

I don't buy it, unless this includes connections and they're allocating an unreasonably large portion of the connection to the short-haul flight.


User currently onlinelightsaber From United States of America, joined Jan 2005, 13448 posts, RR: 100
Reply 11, posted (3 years 3 months 6 days 22 hours ago) and read 12880 times:
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Quoting MaverickM11 (Reply 7):
Quoting ScottB (Reply 6):
Of course, nothing about when/if they'll ever make a profit.

Details . Their passengers have iPads. What more do you want.

   What about us with Kindles?  

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineLAXintl From United States of America, joined May 2000, 26026 posts, RR: 50
Reply 12, posted (3 years 3 months 6 days 22 hours ago) and read 12867 times:

Quoting ScottB (Reply 10):
Source?

Reports available by

http://planestats.com/

Also regarding allocation of connecting revenues, is most often done as the square root of miles per segment, which will always weigh a higher percentage in favor of shorter segments rightfully as they have the higher cost to generate. System contribution yield is determined by subtracting the local segment revenue and distance from the total itinerary revenue and distance, and dividing the remaining revenue by the remaining miles.

[Edited 2011-08-24 11:02:12]


From the desert to the sea, to all of Southern California
User currently offlineScottB From United States of America, joined Jul 2000, 6808 posts, RR: 32
Reply 13, posted (3 years 3 months 6 days 20 hours ago) and read 12570 times:

Quoting LAXintl (Reply 12):
most often done as the square root of miles per segment, which will always weigh a higher percentage in favor of shorter segments rightfully as they have the higher cost to generate.

I'll agree that this is a reasonable way to allocate cost per segment, but I do not agree that this is a logical way for allocating revenue. This methodology has the potential to bias segment revenue in favor in favor of low-yielding connections which in truth do not contribute anywhere near that amount of revenue, particularly in markets with highly competitive pricing.

If this is how VX is running their revenue models, then I'm not surprised they continue to lose money.


User currently offlineenilria From Canada, joined Feb 2008, 7552 posts, RR: 14
Reply 14, posted (3 years 3 months 6 days 20 hours ago) and read 12522 times:

Quoting LAXintl (Reply 5):
Below is what they mentioned in their DOT filings back in 2007 as potential future destinations for consideration in addition to the initial 1st year launch cities of San Francisco, New York, Washington, DC, Los Angeles, San Diego and Las Vegas.

I can't believe they will really take those 13 additional planes in the next year. I think they will scale it back.


User currently offlineUALFAson From United States of America, joined Mar 2004, 736 posts, RR: 4
Reply 15, posted (3 years 3 months 6 days 19 hours ago) and read 12357 times:

Wow, what a horribly written article. I mean, from a journalistic standpoint. As free publicity and PR for the airline, it was great!

All that BS about being "the airline of choice for eco-conscious fliers" and having planes that are "far more fuel efficient" than their competitors. Girl, please! I don't know what the reputation is of the Mercury News, but this article makes it look like a puff piece.



"We hope you've enjoyed flying with us as much as we've enjoyed taking you for a ride."
User currently offlineRWA380 From United States of America, joined Feb 2005, 3435 posts, RR: 5
Reply 16, posted (3 years 3 months 6 days 19 hours ago) and read 12185 times:

Why haven't they started PDX? It was on the list of originally intended cities to serve.


AA AC AQ AS BD BN CO CS DL EA EZ HA HP KL KN MP MW NK NW OO OZ PA PS QX RC RH RW SA TG TW UA US VS WA WC WN
User currently offlineSANFan From United States of America, joined Aug 2006, 5559 posts, RR: 12
Reply 17, posted (3 years 3 months 6 days 18 hours ago) and read 11624 times:

Quoting RWA380 (Reply 16):
Why haven't they started PDX? It was on the list of originally intended cities to serve.

Source please. I don't recall ever seeing PDX listed as you claim and I sure don't see it on this (correct) list of announced start-up cities...

Quoting LAXintl (Reply 5):
...the initial 1st year launch cities of San Francisco, New York, Washington, DC, Los Angeles, San Diego and Las Vegas.

bb


User currently offlineRamblinMan From United States of America, joined Oct 2010, 1138 posts, RR: 1
Reply 18, posted (3 years 3 months 6 days 18 hours ago) and read 11531 times:

Quoting ScottB (Reply 6):
But in the very competitive short-haul routes, they are still unable to get their "people with higher disposable incomes" to pay more for their product -- or even as much as the competition can get.

Funny thing about the vast majority of high-income individuals is that they are the ones who most aggressively pursue a "bargain." It's how they stay wealthy.

Why do you think the Camry is the most popular car among $1million+ net worth households?


User currently offlinefreakyrat From United States of America, joined Aug 2008, 884 posts, RR: 1
Reply 19, posted (3 years 3 months 6 days 18 hours ago) and read 11481 times:
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I'm on board a Virgin America A320 (flight 854) enroute from SFO-DFW. This is my first experience flying Virgin and certainly will not be my last. It is a more civilized way to fly. I like the way they treat their customers as guests. I like the onboard look of their aircraft from the lighting to the RED entertainment system. The leather Recaro seats are very comfortable and I have plenty of leg room. All in all this is a very nice experience.

User currently offlineikramerica From United States of America, joined May 2005, 21562 posts, RR: 59
Reply 20, posted (3 years 3 months 6 days 17 hours ago) and read 11080 times:

Quoting UALFAson (Reply 15):
All that BS about being "the airline of choice for eco-conscious fliers" and having planes that are "far more fuel efficient" than their competitors.

Well I guess because they don't have any regional jets, it's true? Well, WN doesn't have any either, but they still fly quite a few classic 737s, so maybe it's still true.

But honestly, just like lower wages, it's a benefit of being a new carrier. As the airline ages, that advantage diminishes...

Quoting RamblinMan (Reply 18):
Why do you think the Camry is the most popular car among $1million+ net worth households?

Because they hate driving?  

Seriously, it may be the most popular single model, but your argument falls apart because it doesn't sell more than the luxury brands combined to this group. Far from it.



Of all the things to worry about... the Wookie has no pants.
User currently offlineRamblinMan From United States of America, joined Oct 2010, 1138 posts, RR: 1
Reply 21, posted (3 years 3 months 6 days 17 hours ago) and read 10915 times:

Quoting ikramerica (Reply 20):
Seriously, it may be the most popular single model, but your argument falls apart because it doesn't sell more than the luxury brands combined to this group.

Huh? Seriously missing the point there bud.

The majority of wealthy individuals (the ones not on this forum) won't pay more than they have to for air travel because they don't see the reason for it. We often assume on this forum that the bargain-fare-chasers are the lower-income fly-once-a-year types, but that isn't really the case.


User currently offlineLAXintl From United States of America, joined May 2000, 26026 posts, RR: 50
Reply 22, posted (3 years 3 months 6 days 17 hours ago) and read 10748 times:

Quoting ScottB (Reply 13):
I'll agree that this is a reasonable way to allocate cost per segment, but I do not agree that this is a logical way for allocating revenue. This methodology has the potential to bias segment revenue in favor in favor of low-yielding connections which in truth do not contribute anywhere near that amount of revenue, particularly in markets with highly competitive pricing.

I'm not sure why you would allocate cost any different then revenue. If you did you would have major disconnects in your network P&L. For example if you only use such squared proration for cost, your short-haul will be (rightfully) show higher cost on per miles basis, but in turn not contribute its share of revenue compared to long-haul which would show very high revenue but have a low cost cost threshold.
In theory then, no one would operate short-haul segments.

Anyhow, the method I described is the most common one out there - and utilized by most (maybe even all) US majors, in additional to several foreign carriers I am familiar with.

Quoting ScottB (Reply 13):
If this is how VX is running their revenue models, then I'm not surprised they continue to lose money.

Their financial numbers have nothing to do with how they internally allocate cost or revenues. It all comes out in a wash at the end.
VX financial performance is what it is as total revenue has not covered the total operating cost plus other financing and special cost items to date.

Quoting enilria (Reply 14):
I can't believe they will really take those 13 additional planes in the next year. I think they will scale it back.

No I think they are indeed coming. VX only last week signed a new maintenance vendor agreement that covers the fitting out of the new deliveries, while they have been on a recent hiring binge, and been spending moneys on a rather substantial IT projects to scale the company up in size.



From the desert to the sea, to all of Southern California
User currently offlineiaddca From United States of America, joined Jul 2007, 286 posts, RR: 0
Reply 23, posted (3 years 3 months 6 days 16 hours ago) and read 10414 times:

Last time I flew VX, plane was so clean and new, felt like I could have eaten off the wing. Much nicer than the grease stained 75s UA shuttles across the country.

That said, they don't know how to develop routes or create a FF program to attract flyers. G4 is doing 10% operating margins on almost exactly the same amount of revenue, while VX is doing -14%. G4 has monopolies on its routes, VX has low market share on its routes. That said, VX has a great opp to take advantage of disgruntled UA flyers who are livid about the rumored changes to MileagePlus. But I doubt anyone in Burlingame has a strategy to take advantage of that opportunity.


User currently offlinelaca773 From United States of America, joined Nov 2004, 4058 posts, RR: 2
Reply 24, posted (3 years 3 months 6 days 16 hours ago) and read 10239 times:
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How is VX doing in their transcon markets? Everyone I know who's flown them has been extremely happy with their inflight product offering and all comment, the legacies are a sad joke at this time when you compare what they have to offer their customer base in terms of inflight amenities.

25 catiii : How so? I flew DL JFK-LAX in first, and the onboard amenities, product, and service surpassed VX. Just because VX offers virtually the same product (
26 JHCRJ700 : If i'm flying cross country i always fly VX. They are truly refreshing. I even drive down to DC to fly on them!
27 jfrworld : You forgot SEA. SEA launched APR 08.
28 LAXintl : What I posted was based on the airlines pre-launch DOT filings. Seattle was not mentioned as an intended year-one city, but instead included in the l
29 EA CO AS : ...and it's been costing them money ever since.
30 hatbutton : Maybe David Cush should check his numbers before making statements like being number one in fuel efficiency. If you take 2010 Total ASMs and divide t
31 Post contains images ikramerica : I rarely if ever "miss the point" of a post. It's usually the other person failing to make the point they thought they were making, or me simply not
32 LAXintl : Well as people have pointed out, the company has not turned a profit, but VX certainly has had an effect on the market place. As article points out L
33 RWA380 : If you look at response number 5 you will see PDX was listed in their 2007 DOT filing. That was the source I used that you requested.
34 LGA777 : I just took my 3rd & 4th Virgin America flight last week LAS-SEA with about a 3 hour connection in their Awesome new Terminal 2 in SFO. Despite bo
35 cubsrule : Sort of - most business travelers (including me) must travel to "undesirable" places (i.e. those not on a coast or Chicago or Dallas) from time to ti
36 MaverickM11 : How much was that ticket?
37 LGA777 : It was a ZED fare as I was travelling non rev space available.
38 StuckInCA : I know that I fairly regularly book on VX when there are other options, even if it means paying a bit more (which it doesn't always). I don't. LOL
39 Flighty : It doesn't matter what millionaires do. It only matters what high spending frequent travelers do. Whether they have a net worth, or not, is not impor
40 ScottB : Incomes are generally higher on the coasts, and that is reflected in things like real estate values. And a business model which relies on selling pri
41 milemaster : Is that why DFW (Ranked #8) and IAH (ranked #1) are both in top 10 most expensive airports to fly from in the country while only two costal cities ma
42 ikramerica : Do the seat backs still have the pointy plastic magazine pockets or are those gone. I want to book VX again for an upcoming trip, but can't deal with
43 ikramerica : Scarcity of land is what drives up real estate values. Incomes often have to be higher to allow employees to afford to live anywhere nearby, but you
44 ScottB : Rankings of average fares don't really reflect per-capita income in a region. MEM is #6 on the list and yet Memphis is far from a high-income area. L
45 milemaster : Per capita income is pretty irrelevant if a market in very large volume is sustaining some of the highest fares in the country. Fares are high becaus
46 Flighty : Right, you bring up real estate prices... which are one reason why disposable income is not necessarily any higher on the coasts. I won't say Alabama
47 ScottB : It depends on what you call "very large volume." MEM has pretty low O&D traffic, and the hub there isn't exactly growing. No, all it indicates is
48 milemaster : I was mostly talking about DFW and IAH rather than MEM. The dollars are being spent regardless of whether it's to a monopoly player or a new entrant
49 BOStonsox : Back when VX announced the list of cities they wanted to fly to, people noticed that BOS, PVD, and BDL were on the list. I find it interesting that SF
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