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747400sp
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Why VX, Was Not A Larger Success?

Tue May 17, 2016 7:44 pm

Hello

With AS recent buy of Virgin America, I wonder, why VX was not a larger success? VA, seems to be doing great for Australia.
 
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Polot
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 7:49 pm

Because they entered highly competitive markets and at the end of the day people generally make their purchasing decisions on schedule and price, not on product.

VX only made money when they basically stopped growing and fuel prices collapsed.
 
jasoncrh
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 8:00 pm

sums it up quite nicely.

Quoting Polot (Reply 1):
Because they entered highly competitive markets and at the end of the day people generally make their purchasing decisions on schedule and price, not on product.

VX only made money when they basically stopped growing and fuel prices collapsed.
 
simairlinenet
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 8:30 pm

To further demonstrate the fact that they are in competitive markets, their routes have the most competition of any U.S. airline and they have almost no monopoly or one-competitor routes. Even in their busiest routes, they had very little share and therefore pricing power.

It also didn't help that they started right before a major recession, one that hurt their home market (California) worse than the rest of the country.
 
N1120A
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 8:33 pm

They could never figure out how to build yields.
Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
 
raddek
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 8:38 pm

Agreed on all points. Their business model really only attracted a very small niche market of pax, so when fuel was up, they were losing their ass quarter after quarter.

It was created at the wrong time and they made a lot of bad choices when it came to managing their yields on routes.

They will be remembered as the day approaches that their final flight rides off into the California sunset one last time...
 
stlgph
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 8:40 pm

who's to say it wasn't the success they wanted it to be?
business was started, it had a nice build up, and the owners sold it off and pocketed some cash along with it.
go open a bar up with some buddies and see what your game-end plan will be.
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UALFAson
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 8:43 pm

Part of it too was they took a very long time to build a comprehensive route network and even now don't serve large cities such as PHL, ATL, BNA, STL, MCI, MSY, IAH/HOU, MSP, and PHX, let alone any small cities. High-fare paying biz travelers need to be able to get to large and small cities and want to earn and burn frequent flyer miles on a variety of routes.

You can't be a successful company offering cheap, fun flights between LAX and SFO and Cali-LAS, which is what they largely did in the beginning.
"We hope you've enjoyed flying with us as much as we've enjoyed taking you for a ride."
 
Flighty
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 8:45 pm

Quoting simairlinenet (Reply 3):
To further demonstrate the fact that they are in competitive markets, their routes have the most competition of any U.S. airline and they have almost no monopoly or one-competitor routes. Even in their busiest routes, they had very little share and therefore pricing power.

Yes but that was their model. Enter large markets. Try to be the best. Try to win premium demand at the expense of the legacies by offering a superior product.

It's not an insane idea but it just didn't work very well. The legacies are unprecedentedly powerful and they made VX's life hellish, stunting its growth. They can survive a lot longer in a price war than VX can. And guess what, everywhere VX went there was a price war.
 
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LAX772LR
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 9:05 pm

Because their business model was, at its core, flawed:
Except in very small niches, price/schedule will win over "product" every time.

IINM, they never had a single unique market. Almost everywhere they went was highly competitive-- so they could never lead on schedule, and their fleet and resources limited how much they could lead on price.


Quoting Polot (Reply 1):
Because they entered highly competitive markets and at the end of the day people generally make their purchasing decisions on schedule and price, not on product.

  


Quoting Flighty (Reply 8):
It's not an insane idea

But it's one that's been tried, and failed, many Many MANY times over.
I myself, suspect a more prosaic motive... ~Thranduil
 
a380787
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 9:10 pm

They should've based out of PDX+AUS instead of SFO+LAX. Maybe the millennial hipsters from those 2 towns will love their mood lighting and actually make this airline work instead of being put on the auction block. /s
 
Flighty
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 9:40 pm

Quoting a380787 (Reply 10):
PDX+AUS instead of SFO+LAX

You are onto something. They could claim to be the owner/leader of those 2 places. They were never market leader of anything as it turned out, but they were a fabulous low fare carrier. Which wasn't their original intent. They really did want to revolutionize air travel on the premium side. Tap into the largest wealth pools and try to get a big chunk of that. It turned out that the wealthy and largest corporate clients prefer legacy loyalty programs and frequency to all destinations. The VX product was great but that wasn't the decisive factor to change the industry and win the business (being top in yield for example) which they never accomplished.

Owning smaller but prosperous cities such as CLT, MSP, have been very successful strategies. Could AUS and PDX match that, maybe someday.
 
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LAX772LR
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 9:51 pm

Quoting a380787 (Reply 10):
Maybe the millennial hipsters from those 2 towns will love their mood lighting and actually make this airline work instead of being put on the auction block.

But that would be supporting a corporation. They'd boycott their own purchased tickets  
I myself, suspect a more prosaic motive... ~Thranduil
 
jetwet1
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 10:00 pm

Quoting UALFAson (Reply 7):
Part of it too was they took a very long time to build a comprehensive route network and even now don't serve large cities

Very much this, as much as I loved VX, they never went where I needed to go, if I had to make a LAS-SFO/NYC then yes, VX every time, the product was/is just so much better on those routes, but that's about it.

Quoting a380787 (Reply 10):
They should've based out of PDX+AUS instead of SFO+LAX

Hmmmmm, no, good idea, but the market size just isn't there.
 
L0VE2FLY
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 10:02 pm

Quoting Polot (Reply 1):
Because they entered highly competitive markets and at the end of the day people generally make their purchasing decisions on schedule and price, not on product.

VX only made money when they basically stopped growing and fuel prices collapsed.
Quoting simairlinenet (Reply 3):
To further demonstrate the fact that they are in competitive markets, their routes have the most competition of any U.S. airline and they have almost no monopoly or one-competitor routes. Even in their busiest routes, they had very little share and therefore pricing power.

It also didn't help that they started right before a major recession, one that hurt their home market (California) worse than the rest of the country.

  
.

Quoting stlgph (Reply 6):
who's to say it wasn't the success they wanted it to be?
business was started, it had a nice build up, and the owners sold it off and pocketed some cash along with it.
go open a bar up with some buddies and see what your game-end plan will be.

In the near future the Virgin America name will cease to exist, I and almost everyone here wouldn't call them a success even if the owners made millions out of the sale. Richard Branson himself said he was unhappy to see his beloved airline go.


Quoting a380787 (Reply 10):
They should've based out of PDX+AUS instead of SFO+LAX. Maybe the millennial hipsters from those 2 towns will love their mood lighting and actually make this airline work instead of being put on the auction block. /s

PDX & AUS are tiny compared to SFO & LAX, plus there's already a large number of millennial hipsters in San Francisco & Los Angeles.
 
JHwk
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 11:02 pm

I would say it was more of a critical mass issue; they needed a few more planes to support a few more routes for them to be a great choice outside of San Francisco. Only flown LAX-SFO-LAX with them personally, but am flying LAX-HNL-LAX next month based on the experience. Would have flown more, but between schedule and routes it was just too hard.
 
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enilria
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 11:08 pm

Quoting 747400sp (Thread starter):
VA, seems to be doing great for Australia.

They had a really rough start, actually.

Quoting 747400sp (Thread starter):
Hello

With AS recent buy of Virgin America, I wonder, why VX was not a larger success?.

I also think the whole branding exercise didn't appeal to middle America.
 
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intotheair
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RE: Why VX, Was Not A Larger Success?

Tue May 17, 2016 11:10 pm

As an SFO-based flyer, I never considered VX a real airline because they never flew to DEN. Now that they do, their schedule is dwarfed by UA's response to flooding SFO-DEN sometimes up to 15x a day. An airline like VX can't compete against that.

I'm really excited to see what AS does to it, though. I wasn't happy to see the acquisition announced at first, but I think this is going to be a great chance for AS to really be successful in SFO and LAX.
300 319 320 321 332 333 345 346 380 717 733 734 735 73G 738 739 744 752 753 762 763 772 77W 788 789 CR2 CR7 CR9 CRK Q400 E175 DC10 MD82 MD90
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airportugal310
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 1:38 am

Quoting stlgph (Reply 6):
who's to say it wasn't the success they wanted it to be?
business was started, it had a nice build up, and the owners sold it off and pocketed some cash along with it.
go open a bar up with some buddies and see what your game-end plan will be.

Pretty much! I know one too many folks who went the bar route, and one too many of those folks lost their ass on it

Quoting LAX772LR (Reply 12):
But that would be supporting a corporation. They'd boycott their own purchased tickets

lol. true

Quoting L0VE2FLY (Reply 14):
In the near future the Virgin America name will cease to exist, I and almost everyone here wouldn't call them a success even if the owners made millions out of the sale. Richard Branson himself said he was unhappy to see his beloved airline go.

True to some extent, but the goal of that business was to make a few bucks for the investors, and it did just that, end goal be damned...
“They bought their tickets, they knew what they were getting into. I say, let 'em crash.”
 
skyhawkmatthew
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 2:02 am

Quoting 747400sp (Thread starter):
VA, seems to be doing great for Australia.

VA was incredibly lucky at the beginning. Less than a year after its launch, the Ansett collapse gifted DJ an enormous market to grow into that QF couldn't fill on its own even if they wanted to.
Qantas - The Spirit of Australia.
 
MaverickM11
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 2:34 am

Quoting stlgph (Reply 6):

who's to say it wasn't the success they wanted it to be?

Literally anyone familiar with the situation

Quoting intotheair (Reply 17):
As an SFO-based flyer, I never considered VX a real airline because they never flew to DEN. Now that they do, their schedule is dwarfed by UA's response to flooding SFO-DEN sometimes up to 15x a day. An airline like VX can't compete against that.

I wonder where they'd be today if instead of focusing on transcon/"hip" destinations, they lost the same amount of money growing and owning the top markets out of SFO. In other words instead of YYZ and PHL they went after 4 daily DEN and 4 daily PHX. I think they'd be in a much better position with critical mass in their own hub.

Quoting LAX772LR (Reply 12):
But that would be supporting a corporation. They'd boycott their own purchased tickets  

Maybe if VX offered more artisan, organic pickled items in bespoke canning jars?

Quoting LAX772LR (Reply 9):
Because their business model was, at its core, flawed:
Except in very small niches, price/schedule will win over "product" every time.

   The fact that their "product" didn't steal the show from late 2000s UA tells you how little product matters. It was just bizarre watching them cancel markets, and then simultaneously announce an upgrade to their IFE and new Banana Republic uniforms.
I don't take responsibility at all
 
DfwRevolution
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 2:35 am

Quoting enilria (Reply 16):
I also think the whole branding exercise didn't appeal to middle America.

What routes did they offer to middle America? They had a grand total of 8 city pairs that started/terminated in a central time zone, most of which from DAL where WN has dominated for nearly a half centurys.
I have a three post per topic limit. You're welcome to have the last word.
 
WesternA318
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 2:59 am

Quoting LAX772LR (Reply 12):
But that would be supporting a corporation. They'd boycott their own purchased tickets

Same with the Apple gadgets they screw around with on a minute by minute basis, right? Oh, let us not forget their status symbol Starbucks cups with the name spelled wrong...

Quoting DfwRevolution (Reply 21):
What routes did they offer to middle America? They had a grand total of 8 city pairs that started/terminated in a central time zone, most of which from DAL where WN has dominated for nearly a half centurys.

I think jetBlue is the same way in the Midwest. VX was trying to be the West Coast version of B6, with better crew. I loved my few segments on VX, but I did see them as a jetBlue clone in Red.
 
Androol
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 4:44 am

I would argue VX was very much a success for the American investors. Unlike Branson who wanted to build a long term product, the Americans were in it for short term gain. Due to U.S. laws Branson either had to take a gamble on partnering with some Americans who would hold most of the cards, or not enter the U.S. market. I was employed by VX for five years and I believed all along that shortly after going public the company would be sold off. The American investors (and Branson too) made a nice, tidy little profit off of their investment and the bottom line that is all the American investors wanted from it. They were not in it for the long haul. Due to the economic downturn that hit just a year after launching, it took a few years longer than expected to reach their goal.
 
aerokiwi
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 6:19 am

Quoting UALFAson (Reply 7):
You can't be a successful company offering cheap, fun flights between LAX and SFO and Cali-LAS, which is what they largely did in the beginning.
Quoting LAX772LR (Reply 9):
Because their business model was, at its core, flawed:
Quoting MaverickM11 (Reply 20):
Literally anyone familiar with the situation

The usual sentiment - meanwhile the owners pocket a nice chunk of cash. Was this the gameplan all along?

If success is becomming a massive, bloated, many-times-over bankrupt company with deep-seated labour discontent, an indifferent customer base, chasing every penny and relying on anti-competitive mergers to survive, then yeah, pass.
 
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LAX772LR
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 6:27 am

Quoting WesternA318 (Reply 22):
I think jetBlue is the same way in the Midwest.

   It confounds me how B6 has managed to avoid the Midwest, or offering critical-mass connections that don't touch a coast, for this long
I myself, suspect a more prosaic motive... ~Thranduil
 
MaverickM11
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 6:45 am

Quoting aerokiwi (Reply 24):
The usual sentiment - meanwhile the owners pocket a nice chunk of cash. Was this the gameplan all along?

Doubtful seeing as the first round of investors were paid out per their contract, and the current round are benefiting from a perfect storm of rebounding economy, fuel prices that cratered, and a bidding war for the airline.
I don't take responsibility at all
 
747m8te
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 7:27 am

Quoting 747400sp (Thread starter):
VA, seems to be doing great for Australia.

Depends how you interpret doing great,

VA/DJ was lucky in the early days as they scored instant market share following the collapse of Ansett. Something VX has not been handed in such a highly competitive market.

In recent years the only reason VA have been able to expand regionally within Australia as much as they have has been thanks to their big share holders pumping cash into them and feeding them passengers (EY, SQ, NZ), as it stands even in these times of low fuel costs they are still making losses. Had it not been for the likes of EY, SQ and NZ investing in VA, they would have a much smaller presence than what they currently hold.

If VX had the same amount of support (relative to market and competition) they no doubt would be much larger too.
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SurfandSnow
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 8:13 am

Lest we not forget what things were like in the mid-2000s when VX was conceived - B6 had taken the East Coast by storm with its cheap chic product, but like most other LCCs it avoided UA's SFO fortress hub and the highly competitive LAX market (B6 served the SF Bay Area and Greater Los Angeles via cheap alternate airports like BUR, LGB, OAK and ONT). In many ways the competitive landscape at SFO was similar to that of JFK, with the incumbent hub operation largely focused on long haul international ops and a few transcon routes; while LAX was highly fragmented between numerous "legacy" airlines like BOS - offering VX a realistic opportunity to become the airport's leading carrier in the medium term provided they could service all of the top markets for Los Angeles travelers.

VX surely expected to encounter fierce competition on high profile routes like LAX-JFK and SFO-ORD, but probably expected to stomach those losses by quickly dominating shorter haul routes like SFO-LAS/PDX/PSP/SAN/SNA that appeared to be of little interest to UA or other carriers. After all, on the East Coast, the legacy carriers had quickly retreated from many of B6's routes and WN was barely a threat to the fledgling airline given its exclusive focus on service to secondary airports (i.e. BWI, ISP, MHT, PVD) rather than primary hubs.

However, competitors responded aggressively to every VX move. SFO-FLL seemed like a great niche route opportunity, but as soon as it was announced both B6 and UA responded by adding their own competing services. SFO-SNA seemed like a popular route that could easily support an LCC competitor (given that it was a AA/UA duopoly), but as soon as it was announced WN responded with retaliatory service that doomed VX from the start. Meanwhile, at LAX, industry consolidation and expansion made all of the chief competitors much more attractive options to Angeleno FFers - making it a lot harder for VX to become a preferred carrier in Los Angeles. AA now offered nonstop service to places like Philadelphia, Phoenix and Sacramento; DL now offered nonstop service to places like Miami, San Francisco and Seattle; UA now offered nonstop services to places like Houston, Minneapolis and Newark; WN now offered nonstop service to places like Atlanta, Dallas and New Orleans.
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santi319
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 8:27 am

Because despite what most a-netters may want you to think, at the end of the day, people
Only care about price, and you know, i'm talking about most people and not only the "ones that would've taken the bus otherwise"......
 
commavia
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 10:28 am

As others have already said, the shortcoming of Virgin America's business plan ultimately can be boiled down to one word: scalability.

The reality is that with a product/service offering tailored to a customer set relatively concentrated in a relatively small number of urban centers - all handily dominated by one or more far larger competitors. And outside of those markets, Virgin America's offering was just less relevant - mood-lit, on-demand-food-ordering A320s (and nothing else) aren't really cut out for BOI or SHV or DAY, or maybe even PHX or HOU or BNA. Virgin America never found a way to viably scale. Virgin America's relatively short history illustrates that the airline managed to grow or be profitable, but never really both. And frankly, given Virgin's still way-below-industry margins, I'm not even convinced that the near-total stopping of growth in the last few years would even have been all enough to generate reasonable profits if fuel hadn't plummeted.

Quoting MaverickM11 (Reply 20):
Literally anyone familiar with the situation
Quoting MaverickM11 (Reply 20):
The fact that their "product" didn't steal the show from late 2000s UA tells you how little product matters. It was just bizarre watching them cancel markets, and then simultaneously announce an upgrade to their IFE and new Banana Republic uniforms.

  

So, so, true.

Quoting aerokiwi (Reply 24):
If success is becomming a massive, bloated, many-times-over bankrupt company with deep-seated labour discontent, an indifferent customer base, chasing every penny and relying on anti-competitive mergers to survive, then yeah, pass.

In the sense that Virgin America ultimately was worth more gone from the market than in it, and thus its owners were able to convince somebody to pay billions of dollars to remove it from said market, I suppose it's true - that's "success." So no, success is not "becoming a massive, bloated, many-times-over bankrupt company," but generally - in business as in life - "success" is defined as survival and existence. In

Quoting SurfandSnow (Reply 28):
VX surely expected to encounter fierce competition on high profile routes like LAX-JFK and SFO-ORD, but probably expected to stomach those losses by quickly dominating shorter haul routes like SFO-LAS/PDX/PSP/SAN/SNA that appeared to be of little interest to UA or other carriers.

I doubt it highly, but if the above is true, then it just underscores how poorly conceived and executed Virgin America's business plan actually was. Of course there was always going to be a fierce response - not just on transcons but on every single flight, every single route - from competitors when Virgin America entered the market charging lower fares for a generally superior product. How Virgin America could ever have seriously expected any different is beyond me. Virgin planned to "dominate" shorthaul routes from SFO? Up against United's megahub that even in 2007 was enormous and powerful? That would be the height of (irrational) wishful thinking.
 
jfk777
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 11:04 am

Was Virgin America ever intended to be a big airline ? IT was always a niche airline, it also went straight for the prestige of the JFK to LAX/SFO markets which are the gravy train for the US3. Boston and Dulles to California followed soon. VA went for the long haul 6 hour flights instead of the 3 hour flights. It never developed an east coast only route system, anything east coast was a flight to the west coast.
 
commavia
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 11:19 am

Quoting jfk777 (Reply 31):
Was Virgin America ever intended to be a big airline ? IT was always a niche airline

Okay, but again, if that's true - and I'm not entirely convinced it is - that just yet again shows a shortcoming in Virgin America's business plan. The airline industry requires at least some level of scale, or critical mass, in order to be broadly competitive. Virgin America never achieved that scale, and thus it did not prove particularly competitive - at least financially.

Quoting jfk777 (Reply 31):
it also went straight for the prestige of the JFK to LAX/SFO markets which are the gravy train for the US3.

I don't think JFK-LAX/SFO were necessarily a "gravy train" for the US3 back in 2007 - I'm not even sure they are now. But in these markets in particular, which by nature of their size and competitive requirement for frequency have long constituted a not-insignificant portion of Virgin America's total capacity, it is notable that Virgin America has gone from having among the best products in these markets to arguably the worst.
 
simairlinenet
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 11:29 am

Quoting SurfandSnow (Reply 28):
Lest we not forget what things were like in the mid-2000s when VX was conceived - B6 had taken the East Coast by storm with its cheap chic product, but like most other LCCs it avoided UA's SFO fortress hub and the highly competitive LAX market (B6 served the SF Bay Area and Greater Los Angeles via cheap alternate airports like BUR, LGB, OAK and ONT). In many ways the competitive landscape at SFO was similar to that of JFK, with the incumbent hub operation largely focused on long haul international ops and a few transcon routes; while LAX was highly fragmented between numerous "legacy" airlines like BOS - offering VX a realistic opportunity to become the airport's leading carrier in the medium term provided they could service all of the top markets for Los Angeles travelers.

Very well said. Thinking abut this further, let's be careful in how we define "success." Is it size or profitability? Just to compare their growth trajectory to JetBlue, the closest comparable airline...

Virgin America started flying in mid-2007, so in 2015 (after 7.5 years of operating)
58 aircraft
10 billion RPMs
$168M / 11.0% margin

JetBlue started flying in early 2000, so in 2007 (after 7 years of operating and the year Virgin America began):
134 aircraft
26 billion RPMs
$41M pre-tax profit / 1.4% margin

So they definitely had some high ambitions and a great selling point for what they thought they could achieve in terms of size.

At Airliners.net we love focusing on the first two numbers and largely ignore the second two. I'll add to my original response with some more observations:
-JetBlue had pretty meager profits too until recently. Virgin America was much more focused on profitability, slowing growth on two occasions to try to get there.
-JetBlue had the advantage of entering the market at a time when other airlines were struggling and entering bankruptcy, creating market gaps they could take advantage of. In contrast, Virgin America entered after most bankruptcies had taken place and there were limited or arguably no gaps.
-Sure looks like Virgin America was a great success financially...
 
commavia
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 11:33 am

Quoting simairlinenet (Reply 33):
Virgin America was much more focused on profitability

I disagree.

Quoting simairlinenet (Reply 33):
JetBlue had the advantage of entering the market at a time when other airlines were struggling and entering bankruptcy, creating market gaps they could take advantage of.

The bigger advantage that JetBlue had is that it's business model was clearly scalable - unlike Virgin America.

Quoting simairlinenet (Reply 33):
In contrast, Virgin America entered after most bankruptcies had taken place and there were limited or arguably no gaps.

There are plenty of demonstrable "gaps" - routes where the market is being unserved or underserved and opportunities exist for new entrants. Just ask Allegiant and Spirit. Again - the problem for Virgin America wasn't the absence of gaps, but that Virgin America's business model was ill-suited to fill those gaps in a competitive marketplace.

[Edited 2016-05-18 05:30:08]
 
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gunsontheroof
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 11:34 am

Quoting a380787 (Reply 10):
They should've based out of PDX+AUS instead of SFO+LAX.

They would have been gone years ago if that'd been the plan, but I get your point. Everyone I know who champions VX around Seattle is very much of the "Hey man, if you're going to Cali for a weekend, try Virgin! They have TVs in the seats and sh*t! They're the best!" I have never seen a Virgin America Visa card in Seattle, and I personally run hundreds of credit card transactions a week (with plenty of AS/DL cards in the mix).

The route network (as others have pointed out) was also doomed from the start. SFO and LAX aren't exactly the markets you want to try and start hubs from (let alone at the same time) if you're a new carrier trying to build brand loyalty in short order and boast a profit.

I suppose the history on VX has yet to be written, but I suspect the word "overambitious" won't be hard to find in the text of the final account. Hopefully I'll get to catch a flight with them before they're rolled into AS.
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jfk777
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 11:40 am

Was Virgin America ever intended to be a big airline ? IT was always a niche airline, it also went straight for the prestige of the JFK to LAX/SFO markets which are the gravy train for the US3. Boston and Dulles to California followed soon. VA went for the long haul 6 hour flights instead of the 3 hour flights. It never developed an east coast only route system, anything east coast was a flight to the west coast.
 
simairlinenet
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 12:55 pm

Quoting commavia (Reply 34):
Quoting simairlinenet (Reply 33):
Virgin America was much more focused on profitability
I disagree.

You disagree because? My exhibit is the two times that Virgin America flattened its growth and stayed stable--and those were when they had the best profitability improvement.
 
commavia
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 1:12 pm

Quoting simairlinenet (Reply 37):
You disagree because?

I disagree because if Virgin America was more focused on profitability, it would have developed a business plan capable of actually producing sustainable profitability rather than having to rely on stopping growth in order to eek out below-industry margins. JetBlue, in contrast, has proven capable of both growing and being profitable, across the country and in geographies of various types and sizes.
 
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cosyr
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 2:27 pm

I think Richard Branson has always underestimated the US market. Virgin Mobile is largely unknown and no longer unique. Virgin America tried to start out on a select few routes cross country. Heavily business routes with FF's that want benefits that will help them out on vacation, and business destinations to any city to which they could need to fly.

In Britain or western Europe you may be able to get away with just a few high profile routes, but the US is not just geographically large, it is also broadly populated. There are not just a few large markets in the US like most countries.

While it may have been possible for Jetblue to start up this way, that was at the top of the dot com bubble, when there were still 7 legacy carriers instead of 3. None had the scale they do now, and some still describe B6 as a niche airline. I doubt there will be another built from the ground up airline to compete with legacies again. Only airlines with a completely different model like Spirit that targets non FF's can really grow meaningfully without consolidation.
 
apodino
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 3:07 pm

I think one mistake VX made was putting their HQ in Burlingame rather than in BOS (They looked at both cities). At the time, B6 had not established their large presence in BOS, and had VX set up shop in BOS, they could have built BOS up to where B6 is now. Of course B6 was established by the time BOS was built up, where VX was a startup.
 
simairlinenet
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 4:15 pm

Quoting commavia (Reply 38):
I disagree because if Virgin America was more focused on profitability, it would have developed a business plan capable of actually producing sustainable profitability rather than having to rely on stopping growth in order to eek out below-industry margins. JetBlue, in contrast, has proven capable of both growing and being profitable, across the country and in geographies of various types and sizes.

Ok, you have good points, though I don't think JetBlue really had that focus until the Hayes era.

Quoting apodino (Reply 40):
I think one mistake VX made was putting their HQ in Burlingame rather than in BOS (They looked at both cities). At the time, B6 had not established their large presence in BOS, and had VX set up shop in BOS, they could have built BOS up to where B6 is now.

I don't recall this. New York and San Francisco were the finalists for HQ--was Boston in the mix earlier?
 
DfwRevolution
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 5:34 pm

Quoting WesternA318 (Reply 22):
Quoting DfwRevolution (Reply 21):
What routes did they offer to middle America? They had a grand total of 8 city pairs that started/terminated in a central time zone, most of which from DAL where WN has dominated for nearly a half centurys.

I think jetBlue is the same way in the Midwest. VX was trying to be the West Coast version of B6, with better crew. I loved my few segments on VX, but I did see them as a jetBlue clone in Red.

Sure, but my point was more in response to Enrila's comment that the Virgin brand didn't appeal to "middle America." While the phrase "middle America" is used in a cultural context, it is true that middle America is geographically congregated in the center of our country. My point is that it's difficult to judge whether the Virgin brand was unappealing to that cultural group when the route network wasn't aligned to serve it.

Quoting Androol (Reply 23):

I would argue VX was very much a success for the American investors. Unlike Branson who wanted to build a long term product, the Americans were in it for short term gain

And how do you maximize long-term gains? You make lots of short-term gains in a row.
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brucek
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 6:20 pm

I wonder if product is more important (vs price / schedule) in the long-haul international markets?
 
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intotheair
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 6:23 pm

Quoting cosyr (Reply 39):
I doubt there will be another built from the ground up airline to compete with legacies again. Only airlines with a completely different model like Spirit that targets non FF's can really grow meaningfully without consolidation.

I don't know if I'd go so far as to say that. It's hard to predict what will happen, and I doubt we'll see anything in the near-term, but I think it would be possible for another upstart to find an underserved market and match it with a compelling business strategy. I've always thought a Flybe-type operation targeting secondary and tertiary cities in the US could have a good run.
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cosyr
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RE: Why VX, Was Not A Larger Success?

Wed May 18, 2016 8:16 pm

Quoting intotheair (Reply 44):
I've always thought a Flybe-type operation targeting secondary and tertiary cities in the US could have a good run.

I live in one of those cities and it is already expensive enough to fly without having separate tickets to get to the big cities. While you can buy a BA ticket and fly on FlyBe, they also don't have 4 airlines in the UK to figure out. In short, I think Flybe is just an unbranded regional like in the US, that you can also buy tickets separately.

I think in the US, either US airlines would kill it with competition from their own branded regionals, or they would just not want to share a regional they can't control or dictate terms of service. Niche airlines like Cape Air and Great Lakes it seams are constantly struggling for survival, and they don't even attempt to connect pax to multiple Legacy's hubs from every city they serve.

Also remember the colossal failures of Independence Air and ExpressJet's branded flying.

[Edited 2016-05-18 13:23:34]
 
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antoniemey
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RE: Why VX, Was Not A Larger Success?

Thu May 19, 2016 12:32 am

Quoting cosyr (Reply 45):
Also remember the colossal failures of Independence Air and ExpressJet's branded flying.

Independence Air ran legacy routes on a fleet of CR2s right in UA's backyard and marketed themselves as an LCC. That was pretty much destined to fail.

The then-XE branded flying had a better chance, but it was mostly a stopgap while they called CO's bluff and found other things to do with those planes. XE didn't have the capital to absorb the kind of losses they'd suffer getting any kind of branded flying established enough to make serious profits. But they WERE smart enough to go after routes that the major carriers wouldn't jump on them for... contracting with Branson, small hops between cities that are large enough to have more than a dozen passengers each way, but not large enough to support someone like WN coming in with a nonstop...

And then they started placing planes with other carriers. 10 with DL in LAX, a few with UA, etc...
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GSPSPOT
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RE: Why VX, Was Not A Larger Success?

Thu May 19, 2016 1:07 am

I believe that VX was just coming into its own. Any enterprise, let alone an airline, needs time to gain traction. In any kind of business course, you're taught to have several years' cash reserves to survive the lean early years.
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