ScottB From United States of America, joined Jul 2000, 6358 posts, RR: 34 Reply 1, posted (7 months 3 weeks 5 days 23 hours ago) and read 10732 times:
Quoting ROSWELL41 (Thread starter): VX has posted a $4 million loss for the quarter. Unfortunate for what is supposed to be one of the strongest quarters of the year for airlines in general.
Very disappointing considering that even bankrupt AMR posted an operating profit and a better net margin -- even including bankruptcy reorganization expenses!
Load factor was down 3.2 points year-over-year and RASM declined 2 percent even as peer JetBlue's RASM increased 6 percent with a load factor increase of 3.8 points. The decrease in CASM was almost entirely attributable to lower fuel costs and longer average stage length.
The exit scenario for Branson and the "U.S. investors" is an IPO, but these numbers won't support an IPO in the next 12 months unless Q3 is a complete blow-out -- and I don't think the macroeconomic environment supports that.
phxa340 From United States of America, joined Mar 2012, 624 posts, RR: 1 Reply 2, posted (7 months 3 weeks 5 days 23 hours ago) and read 10674 times:
This would support the rumor that investors are losing patience. The key metrics are headed in the wrong direction. VX caters too much to the price sensitive customer looking for an exciting experience and not the loyal business traveler expecting first class upgrades etc.
The long stage length of flights isn't helping either. Best of luck but I don't see VX having a bright future in this form.
SuperDash From United States of America, joined Sep 2003, 563 posts, RR: 0 Reply 4, posted (7 months 3 weeks 5 days 14 hours ago) and read 9660 times:
I love the spin...$4M....
Now if we dig slightly deeper and don't read the Virgin America corporate koolaid and we look at the REAL numbers....Another $31M loss for the quarter...up $10M from last year. And for the year....$107M loss....just ever so slightly above their $66M loss a year before.
People, these are not good numbers.
But there is nothing to see here...Doing great...Keep on keepin' on.
While I detest Virgin America and its old school 1800's robber baron style origin story, i will grant them that showing an operational profit is the first key to sucess. Won't keep you alive, but that "$4M" is atleast close...
You are right though, investors will want to see much more from a company as small and as middle aged as Virgin America has become. Can't play the startup card anymore with the money folks, yet its not a large established airline that shaving a few % here and there can suddenly start putting hundreds of millions in the bank.
NWADTWE16 From United States of America, joined Jun 2012, 242 posts, RR: 0 Reply 7, posted (7 months 3 weeks 5 days 13 hours ago) and read 9487 times:
I think the doomsayers are just loving this but you dont invest in the airline business expecting short term return. VX is clearly on a 10 year model and i think they are progressing nicely. All figures point to getting closer to their goal each time.
The PRESS RELEASE is just that but theres alot more to the VX story than what the posters above have detracted from it so i feel the entire post needs to be visible.
SAN FRANCISCO, Sept. 24, 2012 /PRNewswire/ -- Virgin America today reported its financial results for the second quarter of 2012. Total operating revenue for the second quarter grew by 29 percent to $347 million on a capacity increase of 32 percent. The Company narrowed its operating loss to $4 million for the second quarter, and improved earnings before interest, depreciation and amortization, and aircraft rental expense (EBITDAR) by 44 percent, to a record high of $54 million. EBITDAR margin for the second quarter rose to 16 percent, a 1.7 point year-over-year improvement. Year-to-date Virgin America reported total revenue of $614 million – a 31 percent increase year-over-year. Operating loss for the six months ended June 30, 2012, was $53 million. Year-to-date the Company has achieved EBITDAR of $61 million, an improvement of 23 percent over the first six months of 2011.
In the second year of an unprecedented capacity growth cycle, Virgin America's unit revenue (RASM) declined a modest 2 percent as compared to the second quarter of 2011. Over the past two years, the airline has increased available seat miles (ASM) by 72 percent with an 11 percent increase in RASM. The Company took delivery of one aircraft during the second quarter, ending the quarter with a total fleet of 52 Airbus A320 Family aircraft. The airline has taken delivery of 24 aircraft total since the first quarter of 2010. This rapid growth established Virgin America's core network and provided an important base for the carrier's future success. This phase of accelerated growth is now largely complete, as Virgin America will take delivery of just one additional aircraft through the second quarter of 2013.
Cost per available seat mile (CASM) excluding fuel decreased by 1.5 percent, despite the cost pressures of growth, reflecting the benefits of economies of scale that Virgin America will see as growth slows. Fuel costs during the quarter averaged $3.40 per gallon – a decrease of 3.4 percent year-over-year, although the quarter was still one of the highest cost periods in Virgin America's history. Virgin America maintains a hedging program to manage the volatility of fuel prices and provide some protection from short-term price increases. As of June 30, the Company has hedged 58 percent of its expected fuel consumption for the rest of 2012, and 30 percent for the first half of 2013.
"With improved margins in the second quarter, our investment in building our network over the past two years is beginning to pay off," said Virgin America President and CEO David Cush. "Despite the economic climate and the historic rise in fuel costs faced since our launch, as a new carrier we needed to grow. After two years of record expansion, we're pleased to have built a strong foundation and to have delivered on our promise of offering the best product in the domestic skies. With just one aircraft delivery in the next twelve months, we will focus on maximizing the value of our network instead of managing additional growth. As we enter this period of slower growth, we expect the investment in our core network to continue to provide improved financial results."
In the 12 months ending in June 2012, Virgin America launched new service to Puerto Vallarta, Palm Springs, Philadelphia, and Portland. Since its 2007 launch, the airline has created 2,600 new jobs, expanded to 19 airport destinations, signed up 2.5 million Elevate® members and swept the reader-based travel awards, including "Best Domestic Airline" in Conde Nast Traveler's Readers' Choice Awards and Travel + Leisure's World's Best Awards. As one of the few expanding U.S. airlines, Virgin America grew by 513 teammates year-over-year for the quarter.
Top Line Second Quarter Reporting Highlights:
Operating results: The airline reported an operating loss of $4 million in the second quarter on revenues of $347 million – a 32 percent improvement year-over-year.
Load factor: Revenue passenger miles increased 27 percent on a 32 percent increase in capacity, resulting in a second quarter load factor of 80 percent – a three point load factor decrease for the quarter year-over-year.
Top line progress: Revenue in the second quarter was up 29 percent versus second quarter 2011. RASM decreased by two percent year-over-year.
Cost control: Operating expense per available seat mile excluding fuel (ex-fuel CASM) decreased by 2 percent in the quarter, reflecting the economies of scale from the Company's growth over the past year.
Cash: The airline ended the quarter with $82 million in unrestricted cash.
This year, Virgin America reached the threshold to be classified a major carrier for reporting purposes by the U.S. Department of Transportation (DOT) and as such began reporting its on-time performance, baggage handling and other key operational statistics to the DOT monthly. For the second quarter of 2012, Virgin America achieved an 85.2 percent cumulative on-time performance, placing the carrier seventh for on-time performance among all reporting major U.S. carriers for the quarter. The airline's baggage handling rate for the first six months of 2012 was 0.88 mishandled baggage reports per 1000 guests, which placed it first among all reporting U.S. carriers for baggage reliability for the first half of 2012.
Key milestones achieved in the second quarter of 2012 include:
In June 2012, the airline inaugurated service to Portland International Airport (PDX) from both San Francisco International Airport (SFO) and Los Angeles International Airport (LAX);
In June 2012, the airline opened a new flight training facility with a state-of-the-art Required Navigational Performance (RNP)-certified CAE Airbus A320 full-flight simulator– the first such pilot training facility of its kind in Northern California;
In May 2012, the airline launched ticket sales on its new Washington Reagan National (DCA) nonstop flight from SFO, after receiving DOT approval to operate the route;
In May 2012,Virgin America, Virgin Atlantic Airways and Virgin Australia, announced a first of its kind joint entertainment, digital and out-of-home advertising campaign to celebrate the unique Virgin in-flight experience and mark the airlines' global frequent flyer partnership – which went live earlier in the spring of 2012;
In April 2012, Virgin America launched its first flights to Philadelphia International Airport (PHL) from SFO and LAX;
In June 2012, Virgin America applied with DOT for its first codeshare agreement with Virgin Australia, which went live in July;
Virgin America added Japan Airlines as an interline partner in June, further expanding the airline's reach. Virgin America has implemented multiple interline partnerships in the first half of 2012. The airline now has 17 interline partners total.
Virgin America flies to San Francisco, Los Angeles, New York, Washington D.C. (IAD and DCA), Seattle, Las Vegas, San Diego, Boston, Fort Lauderdale, Orlando, Dallas-Fort Worth, Los Cabos, Cancun, Chicago, Puerto Vallarta, Palm Springs (seasonally), Philadelphia and Portland.
Although a privately held company, Virgin America is announcing these earnings results in advance of the DOT quarterly reports.
jblua320 From United States of America, joined May 2002, 3160 posts, RR: 21 Reply 9, posted (7 months 3 weeks 5 days 9 hours ago) and read 9059 times:
Quoting NWADTWE16 (Reply 7): I think the doomsayers are just loving this but you dont invest in the airline business expecting short term return. VX is clearly on a 10 year model and i think they are progressing nicely. All figures point to getting closer to their goal each time.
No investor would willingly pour money into an aviation start-up whose business plan didn't forecast any kind of returns until the 10th year. VX can't show any trending data that suggests they are moving closer to profitability; if anything, it's the opposite. One number may look better in one quarter, but every time, another number suffers (i.e., CASM, RASM, etc).
ScottB From United States of America, joined Jul 2000, 6358 posts, RR: 34 Reply 12, posted (7 months 3 weeks 5 days 1 hour ago) and read 6893 times:
Quoting NWADTWE16 (Reply 7): Cost per available seat mile (CASM) excluding fuel decreased by 1.5 percent, despite the cost pressures of growth, reflecting the benefits of economies of scale that Virgin America will see as growth slows.
Does VX management actually think people will believe this statement? The "cost pressures of growth" are generally DOWNWARD -- because fixed costs like back-office staff, I.T. systems, executive pay, marketing, etc. can be spread over more customers and tickets, because the new employees hired in to support that growth start at the bottom of the pay scale, and because the new aircraft entering the fleet enjoy a maintenance holiday for the first several years. As growth slows, VX will NOT see improved economies of scale; rather their labor & maintenance unit costs will increase.
Quoting NWADTWE16 (Reply 7): "With improved margins in the second quarter, our investment in building our network over the past two years is beginning to pay off,"
The margins didn't improve because of their "investment in building [the] network." Their margins improved because fuel was less expensive. If fuel costs had stayed level, their operating margin would have been worse than in 2Q2011 at -2.6% vs -2.2%. The EBITDAR number is specious since you can't run the airline without planes and their fleet costs nearly $20 million/month to rent. EBITDAR is up $17 million largely because aircraft rent was up $14 million and fuel was down $5 million.
Quoting NWADTWE16 (Reply 7): VX is clearly on a 10 year model and i think they are progressing nicely.
VX is not on a "10 year model." They've been planning for an IPO this year or next -- but a net loss of $108 million for the fist six months of this year won't support an IPO in 2013, either.
staralliance85 From United States of America, joined Jul 2011, 165 posts, RR: 0 Reply 14, posted (7 months 3 weeks 4 days 14 hours ago) and read 5957 times:
With all of these airline mergers UA/CO, DL/NW and Southwest/Air Tran and AA going down the tubes ,it is going to be impossible for airlines like Virgin America to survive in this economic environment. Southwest very dominant in as a low cost carrier and they are going to be hard to compete with. The only way I see Virgin America Not closing up shop is if they merge with Jet Blue and/or Alaska Airlines.
NWADTWE16 From United States of America, joined Jun 2012, 242 posts, RR: 0 Reply 15, posted (7 months 3 weeks 4 days 13 hours ago) and read 5835 times:
Now i only see what i see but since VX joined Sabre, maybe a year ago (not even sure if its that long) they have become much more accessible to especially Business travelers and i can say for certain they have an extremely loyal base. Besides the base people are jumping all over any opportunity to fly them and the prices are much higher than what i was seeing 6 months ago. They are always full on all the red-eyes from SFO/LAX-FLL-BOS-PHL-JFK looks like ORD loads might not be so great and PDX looks light. SEA seems pretty good and DFW is a sure winner, especially as they are picking up alot of new pax due to the current AA debacle. Once people have flown them they litteraly beg for them if its even an option. Not sure the RASM on the inter-Cali routes but they are all always at capacity as far as availability. Even the LAS-JFK is usually 80% or so. I know everyone sees no profit as 'oh so horrible, its all over news' but im willing to bet that VX investors are seeing the progress and we are NOW in the busy business traveler season not just out of it as someone said before. Summer is leisure and their routes are hardly leisure. maybe someone from VX can confirm this but they must be banking alone off the Transcons, there is always limited or No availability in all classes..and overall take into account they must have one of the higher stage lengths comparitably.
Polot From United States of America, joined Jul 2011, 1497 posts, RR: 0 Reply 16, posted (7 months 3 weeks 4 days 4 hours ago) and read 5505 times:
Quoting NWADTWE16 (Reply 15): Summer is leisure and their routes are hardly leisure. maybe someone from VX can confirm this but they must be banking alone off the Transcons, there is always limited or No availability in all classes
Transcons are full of leisure passengers in the summer. People on the east coast visiting California and people of the west coast visiting New York and other places out east. And while transcons are full they are long (meaning they are more expensive to operate) and very competitive (lowering yields).
Quoting NWADTWE16 (Reply 15): and overall take into account they must have one of the higher stage lengths comparitably.
That is not necessarily a good thing, especially for a purely domestic (plus Mexico) airline.
NWADTWE16 From United States of America, joined Jun 2012, 242 posts, RR: 0 Reply 17, posted (7 months 3 weeks 3 days 15 hours ago) and read 5125 times:
I agree its not a good thing (stage length) but it must be considered as most of their arsenal is running long flights daily. I disagree a bit regarding VX on the Summer vaca crowd.. They seem to attract alot of Entrepreneur type, small business, web business people and granted im in Business Travel but corporations big and small are booking them frequently lately. I cant speak for before sabre and maybe VXCabingrrl can chime in here on what the crowds have looked like lately. (speculation based off my day to day involvement)> I think they are headed for a small profit finally in this next quarter and either way im thinking these investors are in it for a longer haul than everyone keeps saying. BTW, of all the 'investor' comments, is anyone actually an investor in VX, because they would be the only ones that would know what the projections are and has been all along.
crj900lr From United States of America, joined Mar 2011, 197 posts, RR: 0 Reply 18, posted (7 months 3 weeks 3 days 15 hours ago) and read 5106 times:
When they start turning a profit for several consecutive quarters then i'll start to think they might have a chance to survive. If it keeps up like this I give them no more then another year to year and a half tops.
NWADTWE16 From United States of America, joined Jun 2012, 242 posts, RR: 0 Reply 20, posted (7 months 3 weeks 3 days 12 hours ago) and read 4880 times:
I think the biggest thing was honestly getting their flights into the main GDS system so that they could even be an option for all the agencies and others who actually book high yield travel. This was completed for them in the past year so they have only now started to reep the rewards. This is why im optimistic and i see it first hand day after day..the corporate world doesnt go to the airline website and book air travel, they rely on their arrangers who use portals providing options from a central GDS database ie SABRE in this case. They couldnt even be considered until this
PHLwok From United States of America, joined May 2007, 374 posts, RR: 0 Reply 21, posted (7 months 3 weeks 2 days 12 hours ago) and read 4464 times:
Quoting NWADTWE16 (Reply 15): Besides the base people are jumping all over any opportunity to fly them and the prices are much higher than what i was seeing 6 months ago. They are always full on all the red-eyes from SFO/LAX-FLL-BOS-PHL-JFK looks like ORD loads might not be so great and PDX looks light. SEA seems pretty good and DFW is a sure winner, especially as they are picking up alot of new pax due to the current AA debacle. Once people have flown them they litteraly beg for them if its even an option. Not sure the RASM on the inter-Cali routes but they are all always at capacity as far as availability. Even the LAS-JFK is usually 80% or so. I know everyone sees no profit as 'oh so horrible, its all over news' but im willing to bet that VX investors are seeing the progress and we are NOW in the busy business traveler season not just out of it as someone said before. Summer is leisure and their routes are hardly leisure. maybe someone from VX can confirm this but they must be banking alone off the Transcons, there is always limited or No availability in all classes
It's good we have a carrier upping the game in domestic service. But there are problems here - if loads are high and they're still losing money, then they're underpricing their product, and since planes are full they cant simply gain more revenue per flight by marketing intended to raise loads. If they can't raise fares to a profitable level because they'll be too high relative to the competition despite having a better product or materially cut costs, then, frankly, they're doomed. If they have a loyal following and high loads, then they should be testing fare increases.
September and October do not typically see an uptick in business travel such that it offsets the end of the summer high season. Seasonal schedule cuts are now coming into effect at most carriers to reduce excess unprofitable capacity, and California flights usually see a heavy drawback in capacity, especially on transcons, due to the drop in vacation traffic. Business travel volume overall is much more tied to macroeconomic conditions rather than the calendar.
PHLwok From United States of America, joined May 2007, 374 posts, RR: 0 Reply 22, posted (7 months 3 weeks 2 days 11 hours ago) and read 4409 times:
Quoting NWADTWE16 (Reply 20): I think the biggest thing was honestly getting their flights into the main GDS system so that they could even be an option for all the agencies and others who actually book high yield travel. This was completed for them in the past year so they have only now started to reep the rewards. This is why im optimistic and i see it first hand day after day..the corporate world doesnt go to the airline website and book air travel, they rely on their arrangers who use portals providing options from a central GDS database ie SABRE in this case. They couldnt even be considered until this
While getting into GDS inventory was an important step, to capture traffic from larger businesses it needs to be coupled with corporate volume discounts. Those discounts have to be enough to matter, but are usually contingent on minimum usage patterns, and VX's small network puts them at a disadvantage here except for businesses at have traffic patterns matching that network.
Looking at my employer, a large consultancy with a majority mobile, geographically dispersed, workforce generating many millions of enplanements annually, we can see VX in the GDS, but they do not have anywhere near the network for us to bother approaching them for a corporate discount - they just don't fly to enough places. Therefore, they appear much more expensive versus the big carriers that we do have discounts with, and while we're physically able to book them, it would be out of policy unless our preferred carriers were sold out or the post-discount fare of the preferred carrier were more (e.g., only Y/B fares left on the preferred carriers while cheaper buckets existed in VX).
Many more senior business travelers can book first class on longer flights - for instance I can on flights over 3.5 hours - and in theory, VX should be able to capture some of this traffic based on a superior on board product. However, though by policy I can book F, I still need to book the least expensive F fare, and once again our corporate discounts mean I book elsewhere as VX is more expensive. I'd actually like to fly VX F during my frequent travels to the West, but it's not worth going against policy, or wasting my clients' money with cheaper options available.
What the big airlines lack in service, they do make up in network size and frequency, which take priority over onboard amenities for obvious reasons.
OOer From United States of America, joined Oct 2005, 1395 posts, RR: 2 Reply 23, posted (7 months 3 weeks 2 days 10 hours ago) and read 4338 times:
If DL/AA/UA were smart they'd cut fares on competing routes for the next couple of months and make Virgin America an extinct airline. Virgin's CASM will only keep increasing and airplanes age and employees move on up the payscale. We'll see how much they lose in Q3 because Q4 and Q1 '13 will certainly be in the red.
KaiTak747 From Switzerland, joined Aug 2012, 145 posts, RR: 0 Reply 24, posted (7 months 3 weeks 2 days 2 hours ago) and read 4108 times:
I really hope that Virgin America can turn this around. I admire their hard products in Y and F and like how they stand out from all the usual legacies. It is a shame, they have a well suited and modern fleet, good brand and image and excellent product. The only thing that they can't seem to do is turn a profit!
25 jetblueguy22: I looked up a little more about Virgin America and saw they have to pay a licensing fee to Virgin for the use of the name. Is this such a high number
26 rickabone: I hope they can turn it around too. After having flown them several times they are EASILY my airline of choice if they fly the route I'm looking to f
27 lightsaber: What expenses are in VX's 'non-operating' expenses? IMHO, too many airlines hide expenses they cannot avoid, thus I consider them 'operating expenses.
28 boilerla: While VX's product is good, time and time again we've been shown that people are not willing to pay enough for it to cover the costs. VX is already m
29 slcdeltarumd11: All of these long flights are taking up so much plane time........I have to think they need to make some shorter routes to stay alive. I have a friend
30 NWADTWE16: Granted VX has less frequencies but if VX cancels a flight due to maintenance and cant fit you on their other i would assume you'd find yourself on A
31 phxa340: With close to 100% loads on UA and AA on the LAX-ORD run , you make it sound easier said than done. Bolleria is simply stating what I strong believe
32 NWADTWE16: Not for sake of continuing argument but using this Friday as an example UA and AA are wide open all flights but one between ORD-SFO/LAX and VX is near
33 boilerla: On UA the LF on LAX-ORD and SFO-ORD are the systemwide average past 80%. (I can't speak for AA, but it's hard to compare considering the airline is i
34 phxa340: Yes it is under the situation you presented. IF the weather turns or a flight goes tech, thats 150ish people they are putting on empty seats on other
35 ScottB: I think history has shown that passengers aren't willing to pay a premium for short-haul service; that's essentially how WN & UA managed to drum
36 Deltal1011man: IPO was expected this year.....thus not a 10 year plan. As for progressing nicely.....if you mean by getting worse then yes....they are. this. clearl
37 DeltaMD90: I'm not a VX hater, but what "figures" are you talking about? I'm guilty of not following VX at all but it seems that most people who do seriously di