Virgin America Tries a New Tactic: Mexico

It’s been awhile since we’ve heard about any new routes from Virgin America, so when I saw a press release saying that they were applying to fly from LA to Cabo, I felt compelled to write.

08_02_20 vxmexicodartsCabo?!? Are they really that desperate to find a place to fly?

This is the second time they’ve jumped in on a route after Frontier has abandoned it. The first was LAX-SFO, and that one hasn’t fared too well so far. At least, that’s the case through the DOT’s recently released November data. The airline only filled 58.7% of seats on that route that month. (Other markets don’t look so good either – the best is LAX-JFK with 68.7%, and JetBlue will be starting that soon.) And this isn’t just historical. I’m assuming that trend is continuing because I’ve seen a lot of cheap fare sales coming out of the airline lately.

So, we’ve seen them shift away from their original transcon idea more toward the short hauls, and now they’re going international. It seems to me they’re just throwing ideas against the wall and seeing what sticks, because this doesn’t seem to be a very cohesive plan.

Why would an airline that has shown interest in serving major business markets all around the US decide to go to an already over-served, leisure-oriented Cabo market? Have they run out of good options in the US already? This does not make sense. They’re flying to a short-haul vacation market that has the added complexity of being international. That means you need to arrange for customs and immigration, and you have to hope that your homegrown IT system can handle international travel. Oh, and those low fares? They don’t look so low after you pile on those international taxes. And of course, live tv doesn’t work down there either.

Maybe it really is just a case of “jumping on the opportunity.” The bilateral agreement with Mexico allows for three carriers from each country to fly this route. Currently, Alaska and American both fly it twice daily from the US and Mexicana flies it from Mexico. Frontier has been flying it, but they’re giving up and that’s why this new authority is available. United has applied for it with the possibility of connections throughout California, and now Virgin America has jumped in with only a couple connecting opportunities that are already well-served.

But as I’ve said earlier, this market really doesn’t need another carrier in it. CEO David Cush says “Since it was a low-cost airline that is giving up the right to fly to Cabo, we think it would be ideal for another low-cost carrier to take its place.” Um, so since it was a low-cost airline that failed in Cabo, does that mean another low-cost carrier should follow in its footsteps?

08_02_21 chewbaccadefenseAfter that statement, he should have added, “Look at the monkey. Look at the silly monkey.” Yes, as a friend of mine said, this a prime example of the Chewbacca Defense. That’s right. It just does not make sense.

Do they have a strategy right now that I’m missing? Someone please help me see the light, because it’s looking pretty dark to me right now. From what I can tell, the best success they’ve had is with their tiny first class cabin. It would seem to me that you’d want to start focusing on what’s worked for you instead of going into a market where first class isn’t going to matter at all.


19 Responses to Virgin America Tries a New Tactic: Mexico

  1. Paul Brady says:

    I agree that this is a very strange play. You touch on what I think is the weirdest bit of all: This is definitely a leisure destination. VX has made business destinations and “real” airports its focus since the beginning. Wish I could figure out what they’re thinking with this move.

  2. jonathan reed says:

    VX must be burning thru a lot of money trying to make something work. I recently needed to book a one way non-stop from SFO to IAD. UA’s cheapest price was almost $700 and several days out the only seats left were middle E- seats. VX had the same non-stop for $135 with much better seat availability. First in VX on that flight was about the same as United’s E- middle seats.

  3. Oliver says:

    Paul, SFO-LAS isn’t exactly a business route (UA flies TED on that route and competes with VX), so I don’t think VX is trying to be a “business” airline.

  4. Zack Rules says:

    They’re probably looking to escape Southwest and jetBlue. If they wanted to add another leisure destination, they should have picked Hawaii. They would need to get ETOPS however. They also need to get approval to fly to Canada.
    Here’s where they should go in 2008
    Philadelphia, Baltimore, Minneapolis, Dallas Fort Worth Portland OR, Reno, Palm Springs, Chicago O’Hare [fat chance getting approval though, jetBlue barely did]
    Pittsburgh, Columbus would be good with just one per day to both LAX and SFO

  5. Paul Brady says:

    Hmmm. Good point. I’d counter that Vegas also does booming convention business, but you’re right that a majority of people flying there are leisure travelers.I still think that VX branded itself as a biz-friendly airline. They had a FF program from day one, and they don’t fly to alternate airports like other LCCs. You think this move to “fun” destinations will continue?

  6. CF says:

    I tend to think that Vegas was more of a utilization flying exercise. They had planes sitting on the ground in between flights and they figured they could send them to Vegas for a quick roundtrip to squeeze some more revenue out of it.

    Anyone else notice that while they have an FF program, they have yet to define benefits?

  7. Your Competitor says:

    Good Luck

  8. Oliver says:

    Right, I have been a member of their FF program since day 1 (even though I have never flown them), but I don’t actually think that they have explained any benefits. If they wanted to encourage freqent travelers, wouldn’t that be the first thing to do (and it’s not like they didn’t have time to think through this while waiting for their license to fly).

  9. Oliver says:

    CF — regarding utlization flying: you’d think they could a less competitive route from SFO. How about SFO-ONT, which costs usually around $300+ on UA’s monopoly CRJs.

  10. Mike says:

    Now when sittin’ in the jury room debatin’ the emancipation proclamation…I want you to think about Chewbacca livin’ on Endor. It just doesn’t make sense.

  11. Winger says:

    I love Wall street. Airline stocks drop because of the new VX. The threat!

  12. George says:

    I think there going after alaskas route system!!!!

  13. Mike says:

    Here’s VX’s problems:
    1) JFK is limiting arrivals and departure within the next month or so. So VX can’t grow it; which was their major plan.
    2) Fuel, as we know, is expensive making the trans con market less profitable. (Not to mention those routes are highly competitive)
    So yes they are changing thier game plan to see what works. If you are going to brand yourself as a “hip” airline you have to go to “hip” places, and Cancun certainly fits the mold. Also, you cannot rely on business travelers (especially if you haven’t defined your FF program.

  14. CF says:

    Mike – About #1, I’m not so sure that building up JFK was their grand plan. Trying to just duplicate what JetBlue is doing isn’t going to work. I was under the impression they were going to build up the West Coast cities as well as connecting major markets around the country. This isn’t doing that.

    And a minor correction – it’s Cabo, not Cancun. But your point is taken.

  15. Mike says:

    Virgin America said they wanted to increase flights out of JKF by 15 each year for the next few years. Also they made a case to the JFK airport that they should be exempt from the upcoming slots because they were new and deserve a chance to expand their JFK operation in order to compete.

  16. CF says:

    Mike – Ah, yes. They did want to build up JFK, but I don’t think that’s their “major” plan. It is definitely a piece of it, you’re right.

  17. Dan Webb says:

    Cranky – when you mention the DOT data on how VX is filling up the seats – where did you find that? I would love to check out some routes from my local airport but don’t know how.

    Thanks for the greatblog!

  18. CF says:

    Dan – Go to this site. I’m using the second table on the list, but there’s plenty more data to mess around with while you’re there.

  19. Dan Webb says:

    Thanks. :)

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