Virgin America Reports Third Quarter 2010 Financial Results

SAN FRANCISCO, Nov. 9, 2010 /PRNewswire/ -- Virgin America today reported a third quarter net profit of $7.5 million – the airline's first quarterly net profit. As Virgin America continues to deliver significant growth, the airline reported a record quarterly operating profit of $21 million (a 314 percent improvement year-over-year), resulting in a 10.4 percent operating margin for the quarter.  The airline reported revenues of $202 million for the quarter – a year-over-year revenue increase of 28 percent.  The airline also reported strong unit revenue performance (RASM) for the quarter, with a 17 percent improvement year-over-year, a period in which the industry's unit revenue grew by 10 percent.  The airline's stage-length adjusted guest unit revenue was up 23 percent.

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"As a young airline fueling growth in a tough economic climate, we're exceptionally pleased with our performance to date," said Virgin America President and CEO David Cush.  "Although the revenue climate improved as a whole during the quarter, our unit revenue performance still outpaced much of the industry.  Our progress toward profitability in just our third year of operations remains impressive, especially given both a global recession and a historic run-up in oil prices since our August 2007 launch.  The credit is due to a growing base of flyers who expect more from an U.S. airline – and our teammates, who continue to deliver the best service and product in the industry."  

The airline's yield per passenger mile in the third quarter was 11 cents, up 20 percent compared to the third quarter of 2009.  Virgin America continued to hedge in order to help manage fuel price volatility.  The airline has hedged 86 percent of its remaining 2010 projected fuel requirements at an average crude oil call strike price of $82 per barrel.  Adjusting for the non-cash unrealized gains on its fuel derivatives, the airline would have reported operating income of $19 million and a 9.4 percent operating margin for the third quarter.  

Third Quarter Reporting Highlights:

• Operating results: The airline reported a record quarterly operating profit of $21 million (a 314 percent improvement year-over-year), resulting in a 10.4 percent operating margin for the quarter (up 7.2 points year-over-year).
• Load factors:  Revenue passenger miles for the third quarter increased 7 percent on a 10 increase in capacity, resulting in a third quarter load factor of 84 percent – a drop of 2 points year-over-year.
• Top line progress:  Revenue in the third quarter of 2010 was up 28 percent versus the third quarter of 2009. RASM increased by 17 percent year-over-year, versus the industry average of 10 percent.  The airline's stage-length adjusted guest unit revenue was up 23 percent versus the third quarter of 2009.  
• Cost control: Operating expense per available seat mile excluding fuel (Ex-fuel CASM) increased by 5 percent due to investment in growth (training, people and aircraft in modification) during the quarter along with one-time credits in 2009.  Ex-fuel CASM year-to-date is 4 percent lower in 2010 than 2009, demonstrating the airline's commitment to continued cost control.  
• Cash:  The airline ended the third quarter with $100 million in total liquidity, including $25 million in unrestricted cash.

"We're continuing to see strong revenue performance into the fourth quarter and with continued industry capacity discipline, we're encouraged by the outlook.  We look forward to expanding our growing network to Dallas-Fort Worth, Los Cabos and Cancun in the months ahead," added Cush.

The airline has seen significant increases in bookings and average fares in the fourth quarter of 2010, in line with the overall positive trends for the industry.  Virgin America continues to experience significant growth with the addition of four new destinations in 2010. In December 2010, the airline will launch new service to Dallas-Fort Worth and Los Cabos and in January 2011 it will launch new service to Cancun.  In July 2010, the airline placed one of the year's single largest aircraft orders at the Farnborough International Airshow – announcing plans to order 40 new aircraft.  The airline's fleet is projected to grow by two-thirds by the end of 2011 and will triple in size by 2016.  Since its 2007 launch, Virgin America has created 1,700 new jobs, welcomed more than ten million guests and has swept the major reader-based travel awards, including being voted "Best Domestic Airline" in both Conde Nast Traveler's Readers' Choice Awards and Travel + Leisure's  World's Best Awards.  As the only airline based in San Francisco, the airline's growth has helped make San Francisco International Airport (SFO) one of the nation's few growing airports.  In spring 2011, the airline will become one of two anchor tenants at SFO's new Terminal Two.

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 operational statistics in advance of DOT's requirement to report.  For the third quarter of 2010, Virgin America achieved an 88.3 percent cumulative A-14 on-time ranking.  For year-to-date from January-September 2010, the carrier achieved an 85.7 percent cumulative A-14 on-time ranking.  The airline also achieved a 99.9 percent completion factor for the quarter.  The airline's baggage handling rate for the quarter was .84 mishandled baggage reports per 1000 guests.  For January-August 2010, the airline's baggage handling rate was .91 mishandled baggage reports per 1000 guests, which would have placed it first among all U.S. carriers for baggage reliability, when compared to DOT's reportable data for the same period.  

In the third quarter, Virgin America continued its year-over-year sweep of the major travel awards, including:

• Best Domestic Airline in Travel + Leisure's World's Best Awards (as determined by readers);
• Number one for guest experience and entertainment in 2010 APEX Passenger Choice Awards™;
• Best Business/First Class among domestic airlines in Conde Nast Traveler's 2010 Business Travel Poll.

Other key milestones achieved during the third quarter of 2010 include:

• Announcement to order 40 additional new Airbus aircraft;
• Announcement of new service to San Jose del Cabo International Airport (SJD) and Cancun International Airport (CUN);  
• Announcement of new service to Dallas-Fort Worth International Airport (DFW);
• Launch of Virgin global frequent flyer partnership with Virgin Atlantic and V Australia/Virgin Blue;
• Upgrades to Red™ in-flight entertainment platform launched, including enhanced Google Maps, an open tab for the airline's on-demand menu and the first seatback in-flight digital Shop platform;
• Third year anniversary celebration at AT&T Park and "Virgin America Day" in the City of San Francisco.

Virgin America flies to San Francisco, Los Angeles, New York, Washington D.C., Seattle, Las Vegas, San Diego, Boston, Fort Lauderdale, Toronto, Orlando, Dallas-Fort Worth (starting in December 2010), Los Cabos (starting December 16, 2010) and Cancun (starting January 19, 2011).

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

EDITORS NOTES:  Virgin America is a U.S.-controlled, owned and operated airline.  It is an entirely separate company from Virgin Atlantic.  Sir Richard Branson's Virgin Group is a minority share investor in Virgin America.

The Company previously released its quarterly financial results as submitted to the Department of Transportation.  Beginning in 2010, its quarterly financial statements will be presented consistent with its competitors.  

About Virgin America:  Headquartered in California and launched in August 2007, Virgin America employs over 1700 people.  The airline's base of operations is San Francisco International Airport.  Virgin America offers in-flight internet service on every flight and hosts the largest in-flight entertainment library in the North American skies via the Red™ platform.  In addition to a 30-film library including foreign language films and Hollywood blockbusters, Red offers live TV, games, seat-to-seat chat, 3,000 MP3s, Google maps, the world's first seatback digital Shop platform and more.  In just three 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 and 2010 World's Best Awards.  For photos and more: www.virginamerica.com

SOURCE Virgin America