Topic of the Week: Virgin America Makes a Profit

Congratulations to Virgin America for posting its first ever full-year profit. It took a big debt restructuring and a halt to capacity increases but it did the trick. Now, is it sustainable? What do you think?


13 Responses to Topic of the Week: Virgin America Makes a Profit

  1. Xnuiem says:

    VX seems so niche. As a DAL flier, they are a non-entity, they go only to a couple of places, so their loyality program is of limited value. They do not have enough flights here to really fit my schedule, and I would have to often connect on the West Coast.

    I would like them to survive, but I am concerned about an industry and market that seems to be pretty intolerant of the niche players.

    Expanding was killing them, but they will have to start again if they want to make it in the long run.

    • eponymous coward says:

      Well, if they have their way, they’d go to ORD, DCA, LGA, SFO and LAX. That’s something (though way behind WN at DAL and AA at DFW, possibly DL if DL ends up operating out of both DAL and DFW).

  2. eponymous coward says:

    Their plan is predicated on going public in 2015, isn’t it?

    Hoo boy. Greater fool theory at work…

  3. Southeasterner says:

    If you can’t make a profit under the current environment you probably shouldn’t be in business.

    The question is will they still be turning a profit during the next market downturn.

  4. Billy says:

    I think it’s a shame that despite the frequently heard complaints about legacy carriers, an airline offering something different and trying to be a bit different must struggle. But it has always been the way.

  5. Jim says:

    I think it’s sustainable as long as they don’t start expanding again, or expand slowly and responsibly. They need to focus on building up loyalty in their key markets (SFO and LAX) rather than flying random routes like DCA-DAL.

    They are now big enough that the established airlines can’t undercut their prices and put them out of business, so they don’t need to worry about that. Very few startup airlines make it this far, so I think they can make it from here.

  6. SAN Greg says:

    Well, we’ll do what we can to help VX remain profitable, as we are flying them next week SAN-SFO in F. They make getting there half the fun!

  7. Wayne Rutman says:

    Never has the expression “a rising tide lifts all boats” been more true. The USA airline industry is now an oligopoly. The two largest discounters — Southwest and AirTran — have merged and are now happy to play along in this high-fare, capacity controlled world. So there’s very little heavy competition or deep discounting out there. I think you’d need to have a TERRIBLE business plan to lose money as a USA airline right now.

    There’s been a fair amount of discussion on Wall Street lately about Virgin America going public this year. I guess we’ll see how good their management is, because I think it would be foolish for them to do it this year. It seems to me the gravy train of consolidation is just leaving the station — profitability is almost certain to increase in the next year. So I’m expecting a 2015 IPO from them.

    Honestly, the more interesting play in the industry right now is Frontier. I don’t really think America “needs” another Jet Blue-like airline (aka Virgin). I think we need an EasyJet: a low fare airline that doesn’t suck that can fly you 500 or 800 miles at a price that a leisure traveler would consider “fair.” Can Frontier become that airline? I don’t know, but it’s a more interesting business model than Virgin’s.

  8. Ryan says:

    Virgin America is the best Domestic Airline bar none. It has proven that by winning every major award over and over again since launch. It has taken awhile to become profitable, but this is due to starting up in one of the worst economic times in US history. Oil prices have declined, but have been at all time highs during their climb. If they can make it this far, and show that they can be profitable, there is no stopping them. Yes, they have made some mistakes along the way, and will probably make more in the future. What they have shown us so far is that they are here to stay. I see slow and steady growth over the next five years and IPO on the horizon. Airline stock can be be risky, which I have learned over the years. I will but this one though, and recommend you do the same. Richard Branson (though a small owner of VX) will not let down!

    Congrats Virgin and thanks for making flying fun again!

  9. Trent880 says:

    Yay profit! It took a capacity cut, a pseudo non-bankruptcy restructuring, $750MM down the drain, and about a fifth of the destinations closed, but it’s a profit! Now who wants to buy a share of this success story?

  10. Carl says:

    It’s not sustainable. If they stop growing their maintenance and employee costs will keep rising. They still have a big revenue problem and they don’t have a sustainable route and revenue strategy. They can only appeal to occasional travelers or those without any elite loyalty, which means they will miss out on the highest volume travelers, and they can’t really make a competitive offering to businesses, and they don’t have an international offering.

    Unlike AS or B6 who have some sustainable competitive strategy through their route system and cost structure, or NK in their LCC model or WN in its route system and frequencies, VX has none.

    The profit is financial engineering to dress up the pig for an IPO. Not sure it will work, but even if they do IPO that doesn’t mean their finances will work.

  11. John says:

    Everyone I know chooses to fly Virgin out of SFO if they can… its the best airline, in the best terminal. The cost of upgrades are fine, and the in-flight amenities finally does it ‘right’ — why wait for drink carts 2x / flight? Just order them.

    Why do the crap airlines that treat you like cattle, or the ones that have awful equipment, thrive while Virgin will probably struggle in the long run? Its frustrating as I’m sure it will eventually fail just to piss me off so I’m forced to fly these crap airlines again.

  12. DavidC says:

    I’m cheering for them. Loyalty at the big 3 will not be rewarded like it once was except for the very top tier. I don’t think anyone is really bragging about the quality of the frequent flyer program they belong to anymore. For me, the question is how will they feed the system? I have not flown them, but they sure do seem to fit the bill for (1) those who like a little hip in their travel and (2) people who are willing to pay for something they actually get..consistent, good service.

    Seems like anywhere the Hollywood or Tech crowd need to go..VX should be thinking about connecting those dots first. But I’m just a bystander.

    Good luck to them!

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