Virgin America Reports Second Quarter 2011 Financial Results

Airline Reports 46 Percent Increase in Operating Revenues

Sep 16, 2011, 13:30 ET from Virgin America

SAN FRANCISCO, Sept. 16, 2011 /PRNewswire/ -- Virgin America today reports its financial results for the second quarter of 2011.  During a period of significantly higher fuel prices, Virgin America recorded a $6.0 million operating loss and an operating margin of (2.2) percent.  The airline achieved impressive revenue growth during the quarter, with a 46 percent increase in operating revenue as compared to the second quarter of 2010.  However, total fuel costs increased by 62 percent, and the Company's average price per gallon of fuel increased by 26 percent year-over-year.  The increase in fuel costs were the primary factor in a $5.6 million increase in Virgin America's operating loss, as compared to the second quarter of 2010.  The airline's unit revenue continued to show significant growth, with revenue per available seat mile (RASM) improving by 12 percent year-over-year, exceeding the domestic industry average RASM increase of 10 percent for the same period.  Excluding new routes added in the past 12 months, RASM in the carrier's established markets improved by 19 percent year-over-year.  During the quarter, the carrier's scheduled capacity increased by 30 percent, compared to the domestic industry's average capacity increase of two percent for the same period.  The airline's mature routes (those flown for more than 12 months) were solidly profitable on an operating basis  for the quarter.

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"Fuel costs continue to weigh on our financial performance even as we achieve and exceed our revenue targets," said Virgin America President and CEO David Cush.  "While it is disappointing to report even a narrow operating loss for the quarter, our mature markets performed exceptionally well.  Against the headwinds of high fuel and the costs of growth as a new airline, we're pleased with our consistent progress and sales performance."

Non-fuel cost per available seat mile (CASM) increased by eight percent over the quarter, as the carrier continued to invest in its teammates, new aircraft and infrastructure to support its growth.  As compared to the second quarter of 2010, Virgin America increased its average aircraft in revenue service by 36 percent – or by 10 aircraft.  In addition, the Company added the full-time-equivalent of 125 teammates during the quarter, incurring recruiting and training costs as the carrier continues to fuel expansion.  As one of the few U.S. airlines creating new jobs, total teammates grew by 23 percent (or 367 full-time equivalent teammates) as compared to the second quarter of 2010.

High fuel prices remained a challenge for both Virgin America and the overall domestic industry during the second quarter of 2011.  Had fuel prices remained flat year-over-year, the Company's operating costs would have been $23 million lower in the second quarter of 2011.  The Company's recorded fuel costs include a $7.2 million non-cash loss on its hedging positions.  Although Virgin America maintained a hedge portfolio against rising crude oil prices, the recent major increase in the crack spread, or difference between raw crude prices and refined jet fuel, was a major factor in the overall cost of jet fuel recorded by the Company in the quarter.  

As one of the few growing U.S. airlines, Virgin America continues to expand its fleet, growing from 28 aircraft in service in the first quarter of 2010, to 46 aircraft by the end of 2011 and a projected 52 aircraft by the end of 2012.  Virgin America recently announced new service to Puerto Vallarta, Mexico, and continues to expand its network from its focus cities of San Francisco and Los Angeles.  In the past twelve months, the carrier has introduced its unique, low-fare service to Chicago, Dallas-Fort Worth, Los Cabos, Cancun and Orlando.

"The next 12 months are an important growth phase for Virgin America as we increase our fleet to 52 aircraft and expand our network.  Our teammates continue to rise to the challenge of growing our Company, while delivering an award winning product.  We are executing well on our long-term vision for Virgin America, with added frequency in our core markets and new warm weather destinations.  Our strong revenue performance, loyal following of flyers and the cost leverage we gain with growth, will allow us to continue building a successful airline as we emerge from our current growth cycle," added Cush.  

Second Quarter 2011 Reporting Highlights:

  • Operating results: The airline reported a $6.0 million operating loss in the second quarter.  The airline's yield per passenger mile was 12 cents, up 12 percent compared to the second quarter of 2010.
  • Load factors: The airline reported an 83 percent load factor in the second quarter, on a 30 percent increase in scheduled service capacity over the year earlier quarter – compared to the industry's average capacity increase of two percent.
  • Top line progress: RASM gains continued to outpace industry RASM gains, with a RASM increase of 12 percent over second quarter of 2010 – a period in which the domestic industry's RASM increased by 10 percent.  Virgin America's average fare increased 11 percent versus the prior year.
  • Cost control: Operating expense per available seat mile excluding fuel (ex-fuel CASM) increased by 8 percent versus second quarter 2010, primarily as a result of investment in the Company's growth (training, people and aircraft in modification).
  • Cash: The airline ended the quarter with $26 million in unrestricted cash and $53 million in total liquidity.

With respect to the third quarter of 2011, the airline has seen significant year-over-year increases in traffic, bookings and average fares.  The airline will release its third quarter results later this year.  

Although Virgin America does not yet meet the size threshold to be classified a "major" carrier by DOT, the airline tracks its on-time performance, baggage handling and other key operational statistics in advance of the DOT's requirement to report.   For the second quarter of 2011, Virgin America achieved an 82.3 percent cumulative A-14 on-time ranking, which would place the carrier third for on-time performance among all reporting major U.S. carriers for the quarter.  Virgin America also outperformed the majority of the industry with a 99.8 percent completion factor.  The airline's baggage handling rate for the second quarter was .86 mishandled baggage reports per 1000 guests, which would place it first among all reporting U.S. carriers for baggage reliability in the second quarter, when compared to DOT's reportable data.

Since its 2007 launch, Virgin America has experienced record-setting growth – with 2,100 new jobs created, more than 14 million guests flown and a sweep of the major reader-based travel awards, including "Best Airline" in both Conde Nast Traveler's Readers' Choice Awards and Travel + Leisure's World's Best Awards.  In the spring of 2011, the airline became an anchor tenant at San Francisco International Airport's (SFO) new sleek and sustainable Terminal 2 (T2).  

Other key milestones achieved in the second quarter of 2011 include:


Although a privately held company, Virgin America is announcing these quarterly earnings results in advance of the Department of Transportation's (DOT) quarterly reports.

Virgin America, Inc.

Consolidated Statement of Operations

For the Three and Six Months Ending June 30, 2011 and 2010









Three months ended June 30                        



Six months ended June 30




2011


2010


Percent Change


2011


2010


Percent Change


OPERATING REVENUES













  Guest

$247,125


$167,583


47.5


$430,327


$299,537


43.7


  Other

21,416


16,865


27.0


39,347


31,711


24.1


Total operating revenues

268,541


184,448


45.6


469,674


331,248


41.8















OPERATING EXPENSES


























  Aircraft fuel

113,290


70,168


61.5


196,644


124,673


57.7


  Aircraft rents

41,798


27,921


49.7


80,227


55,812


43.7


  Wages, salaries and related costs

33,893


26,053


30.1


66,239


53,312


24.2


  Aircraft maintenance

13,261


8,571


54.7


26,223


17,929


46.3


  Landing fees and other rents

21,336


16,193


31.8


40,924


32,577


25.6


  Sales and marketing

22,867


15,756


45.1


40,913


27,585


48.3


  Guest services and supplies

10,838


7,850


38.1


19,969


15,609


27.9


  Depreciation

1,863


2,410


(22.7)


4,790


5,627


(14.9)


  Other operating expenses

15,396


9,956


54.6


29,236


20,176


44.9


Total operating expenses

274,542


184,878


48.5


505,165


353,300


43.0















Operating income (loss)

(6,001)


(430)


1,295.6


(35,491)


(22,052)


60.9















Operating margin

(2.2%)


(0.2%)


2.0

pts

(7.6%)


(6.7%)


0.9

pts














Other (income) expense

15,698


15,099


4.0


30,783


29,008


6.1















Net income (loss)

($21,699)


($15,529)


39.7


($66,274)


($51,060)


29.8















EBITDA

($4,138)


$1,980


309.0


($30,701)


($16,425)


86.9


EBITDAR

$37,660


$29,901


25.9


$49,526


$39,387


25.7















Adjusted for unrealized (gains) losses on fuel derivatives:













  EBITDAR

$44,907


$40,601


10.6


$57,829


$52,721


9.7


  Operating income (loss)

$1,246


$10,270


(87.9)


($27,188)


($8,718)


(211.9)


  Operating margin

0.5%


5.6%


(5.1)

pts

(5.8%)


(2.6%)


(3.2)

pts



Virgin America Inc.

Comparative Operating Statistics




Three months ended





Six months ended







June 30


Percent



June 30


Percent





2011


2010


Change



2011


2010


Change


















Available seat miles (ASMs)(millions)


2,449


1,882


30.1



4,622


3,653


26.5


Scheduled ASMs (millions)


2,449


1,882


30.1



4,622


3,653


26.5


Average stage length (miles)


1,563


1,518


3.0



1,576


1,504


4.8


Aircraft in service


38


28


35.7



37


28


32.1


Fleet utilization (hours per day)


12.7


13.1


(3.1)



12.8


12.9


(0.8)


















Guests



1,281,844


964,831


32.9



2,285,937


1,849,404


23.6


Scheduled revenue passenger miles (millions)


2,030


1,542


31.6



3,676


2,885


27.4


Load factor


82.9%


81.9%


1.0

pts


79.5%


79.0%


0.5

pts

Average fare


$192.79


$173.69


11.0



$188.25


$161.96


16.2


Total revenue per available seat mile (cents)


10.97


9.80


11.9



10.16


9.07


12.0


Guest revenue per available seat mile (cents)


10.09


8.90


13.4



9.31


8.20


13.5


Yield per passenger mile (cents)


12.17


10.86


12.1



11.71


10.38


12.8


















Cost per available seat mile (cents)


11.21


9.82


14.1



10.93


9.67


13.0


Cost per ASM, excluding fuel (cents)


6.59


6.09


8.2



6.67


6.26


6.5


Fuel cost per gallon


$3.52


$2.80


25.8



$3.25


$2.58


26.0


Fuel gallons consumed (thousands)


32,192


25,075


28.4



60,530


48,383


25.1


Teammates (FTEs)


1,948


1,581


23.2











About Virgin America: Headquartered in California, Virgin America offers guests attractive fares and a host of innovative features aimed at reinventing air travel.  In just over four years flying, Virgin America was named "Best Domestic Airline" in the Conde Nast Traveler 2008, 2009 and 2010 Readers' Choice Awards and "Best Domestic Airline" in Travel + Leisure's 2008, 2009, 2010 and 2011 World's Best Awards.  The airline's current base of operations is San Francisco International Airport (SFO).  In April 2011, the airline became an anchor tenant at SFO's new sleek and sustainable Terminal 2.  Virgin America flies to San Francisco, Los Angeles, New York, Washington D.C., Seattle, Las Vegas, San Diego, Boston, Fort Lauderdale, Orlando, Dallas-Fort Worth, Los Cabos, Cancun,  Chicago and as of December 2, 2011Puerto Vallarta.  For more, please visit: www.virginamerica.com

SOURCE Virgin America



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