Last month, Virgin America decided to sell a pretty unique deal through Gilt City. Anyone with $60,000 could get a roundtrip charter flight anywhere Virgin America flies in the US. That in itself isn’t that unique, but the purchaser also got something special . . . the right to permanently (at least as long as the airline exists) name an airplane in the Virgin America fleet.

If you think about it, this is a great deal, depending upon how you use the flight. With 146 seats, it ends up costing only about $410 per person for a roundtrip flight. That’s not bad at all. In fact, I even briefly toyed around with doing it myself and turning it into an airline dork charter, but I figured there was absolutely no chance at all that Virgin America would let me name an airplane “The Cranky Flier.”

This offer actually went pretty quickly and it ended up being purchased by a group of alums from the Stanford Graduate School of Business (GSB), my alma mater. I was able to find one of the co-conspirators, Liz Anderson, and she told me all about how this came together.

Apparently, she was on vacation with some other recent GSB alumns when this opportunity came up, and they started talking about it seriously. In the end, five of them agreed to go all-in and buy the thing. They put one credit card in and clicked. It bought the whole thing. Oops. Since I don’t believe anyone had a $60,000 credit limit, they called Gilt right away and had it split five ways. Then it was time to fill up the airplane.

The group decided to pitch this as Miami FOAM. What does that mean? At the GSB, classes generally run Monday/Tuesday/Thursday/Friday so people use their Wednesdays for a variety of other things. (I spent mind volunteering with a group called IHAD.) But one thing that was constant was that Tuesday nights were great nights for going out and blowing off a little steam to break up the grueling week.

The top 10 percent of students are known as Arjay Miller Scholars (he was a former dean), so when students created a weekly Tuesday night drinking club, the name naturally became Friends of Arjay Miller (FOAM). In other words, if you were out drinking instead of studying on Tuesday night, you weren’t going to be an Arjay Miller Scholar yourself. Part of the FOAM tradition is an annual trip to Vegas, where hundreds of students dress up in ’70s gear, fly down to Vegas on Tuesday night, party all night, and fly back the next day. Curious what that looks like?

That’s right. That was my first year trip down to Vegas. We had about 100 seats on that airplane, and just about everyone looked as stupid as I did. (I imagine that most of you can figure out which airline it was from that picture.) In fact, it was such a great time that I continue to do an annual alumni Vegas FOAM trip with friends from school. (Though it’s generally a lot more tame these days.)

For this organizing group, it naturally made sense to turn this opportunity into an alumni FOAM event, and they’d take the party to Miami. Why Miami? “We just picked the coolest, farthest place you can get,” Liz said. Since most of the group was still in San Francisco, they figured they’d go to Miami (Ft Lauderdale, actually) and spend the weekend down there with 141 of their closest friends.

The website went live and they emailed the 2009, 2010, and 2011 graduating classes. Within 30 minutes, they had 100 people committed, and it was completely sold out in less than 3 days. And why not? It’s a great deal.

Technically, the group isn’t allowed to sell seats on the flight. I assume this was a stipulation to prevent some corporate entity from buying up the package and re-selling it. So this group is charging for events on the ground. But let’s assume that $410 per person somehow gets allocated to the flight. That’s not a bad price for a weekend roundtrip from San Francisco to Miami on its own, but this is even better.

Since it’s a charter, they got to pick the departure time to fit their schedule (morning out, evening back). They also get to operate at a fixed base operator, away from the passenger terminal. This means that they don’t have to go through any of the security hassles everyone else faces. And they can bring liquids, etc.

But they don’t need to bring a lot of liquids onboard, because the flight includes free drinks (yes, alcoholic) and food. I’m afraid that with this group, Virgin America might lose thousands just on the booze alone. But if you’re a traveler, this is a steal.

And yes, they still get to name an airplane. What’s the plan for that? It sounds like the group wants to name it the “Friends of Arjay Miller,” but with Arjay Miller still alive, they’re trying to get permission from him first. Virgin America also has the right to refuse any name that’s suggested, but I can’t imagine there’s be a problem with this one.

Now that the trip is fully subscribed, they’re working on plans for while they’re there. There’s going to be a charity component to this that might involve auctioning seats or asking for donations along the way. That’s all in the works now, but I’ll post about it here when it comes together.

I won’t be on the flight, but I’m hoping that I can get someone who will to write me a trip report.

Pack patience for air travel amateurs – CNN Out of the Office
’tis the season for amateur travelers to come out of the woodwork. Here are some thoughts on how business travelers can navigate it.

In the Trenches: Recognizing Our Own Recognition – Intuit Small Business Blog
Just talking a little bit more about how to deal with getting recognized as a Top Travel Specialist by Conde Nast.

Virgin America dogged by reservations glitches – USA Today Today in the Sky
Ben got into some more detail about the Virgin America reservation system problems and he cited my post on the subject.

Tech tames travel’s travails – The Detroit News
A brief mention at the end about Cranky Concierge. Though we don’t actually have an app.

Alaska Airlines Menu Tasting Was Eye-Opening – Conde Nast Daily Traveler
A different look at my visit to the Alaska Air kitchens this week.

If you’ve flown Virgin America any time since October, there’s a good chance that your experience has been sub-par. No, it has nothing to do with the onboard product but rather the fragile technology infrastructure, which is still suffering after a reservations system change made back in October. That’s right, we’re talking well over a month and there are still widespread issues.

A reservation system change is a major undertaking. That system is the heart of the airline, and it talks to just about every other system in the company. So it’s not an easy thing to just switch on a whim. That’s why airlines prepare for a reservation system switch like they’re preparing for the apocalypse. Airlines have lately even shut down booking for a weekend, ramped up call center employees, and thinned flight schedules in order to deal with the pain. Virgin America did that as well, but it still wasn’t prepared.

Were it anyone else, people would be crucifying the airline. Virgin America, however, just doesn’t serve as many cities and doesn’t have the exposure that others would get when there’s a major failure like this one. Remember when US Airways transferred over to the pre-merger America West technology? For a couple of days, people were angry at what a mess it was. But that was just a couple of days. JetBlue and WestJet have also made reservation system transitions but none have seen the painful, persistent problems that have plagued Virgin America customers.

We’ve seen this first hand at Cranky Concierge with customers who still cannot check in online for their flights. They just have to wait until they get to the airport, unhappily. One frequent Virgin America flier reached out to me with a laundry list of problems that have made him miserable since day one of the switch. He couldn’t check in, change seats, or make changes online and call center waits for well over an hour. Frequent flier numbers bounced out of reservations, itineraries had incorrect billing information (terrible for those who need to submit expenses), and refunds have gone unprocessed. He even submitted a challenge to a charge for a ticket that should have been refunded, and Virgin America never responded to the credit card company’s inquiry. The credit card company just issued the refund.

So what the heck is going on here? This is just a mess.

The problem really centers around Virgin America’s IT strategy. Like many new entrants, Virgin America thought it could do things better than the existing carriers. Its Chief Information Officer at the time, Bill Maguire, was profiled in CIO magazine explaining how he was going to save the airline a ton of money by using newer architecture and by outsourcing just about everything. Maguire is long gone – left in 2008 and is at San Jose State University now – but his legacy remains.

Virgin America patched together its systems on its own, sometimes using open source software. For its reservation system, it went with a system called aiRES that never lived up to its promises. In fact, the launch customers WestJet and Virgin Blue, got so fed up with all the money they had thrown down a hole trying to get it working that both walked away. (WestJet is on Sabre, and the now-called Virgin Australia has announced an intention to do the same.) Virgin America also apparently quickly realized that aiRES wasn’t going to cut it and announced earlier this year it would switch to Sabre.

This was particularly important for Virgin America as it moved forward with a strategy to build tighter partnerships with other airlines. While a new and cool reservation system in a vacuum might function just fine, it’s a lot harder to get it to properly interface with airlines on other systems. And Virgin America was tired of waiting, so it opted to jump to Sabre.

The problem, however, is that its other systems were not very well suited to talk to Sabre, and that’s the problem we continue to face today. How these problems were not picked up in testing is unclear, but I’m sure Virgin America wishes it had done this differently at this point.

According to the airline, the number of problems have been diminishing and it says “we hope to have full resolution soon.” But this is still getting on toward two months after the new system went live. Virgin America continues to have a little blurb linked from the top of its homepage with an apology, but the text never changes. The only thing that changes is the date at the top.

So is there a way to know if you’ll be impacted by this mess? I asked, and there isn’t. I wondered if the problems came from reservations that were made before the switch, but that wasn’t it. While issues are more likely for older reservations, problems are plaguing new ones as well.

Hopefully we’ll see this fixed soon, but in the meantime, Virgin America is trying to at least compensate people.

We continue to waive all change/cancel fees for flyers having issues and Elevate members flying during this period have received a direct apology from our CEO and a free flight (5000 points) credited to their accounts.

That’s a nice gesture, but it still is not a substitute for just getting the problem fixed. This never should have happened the way it did, and Virgin America’s customers continue to pay dearly for it. With any luck, this will finally be fixed in the near future.

Last week at the APEX expo, Virgin America announced plans for its next generation inflight entertainment system. Wait, doesn’t Virgin America already have one of the best systems around? Why would the airline be doing this? It just posted yet another quarterly loss (no surprise) so why is it messing around with introducing a new inflight entertainment system?

Actually, this one should bring costs down while even improving the experience for passengers. Anything that helps the airline bring its costs down is good, and since it’s good for the passenger experience, that makes it even better.

The buzz about the new system is that it’s wireless. That was the big buzz word this year at the APEX expo in general, but this probably isn’t what you think. The airline isn’t ditching seatback entertainment but instead is just changing the way that content gets to the seats.

The system that Virgin America uses now requires a lot of wiring throughout the airplane. The content comes through the wires from a “head end” system through the airplane until it gets to each seat. The systems are pretty expensive, especially when they’re from one of the existing titans of IFE, Panasonic, as is the case with Virgin America.

This new system from Lufthansa Systems will see content come from the same place, but that’s where things change. From there, the content will be wirelessly transmitted to each seat.

So when you get on the airplane, you’ll still see a monitor in each seatback as you do today, but the content will get there in a different way. You shouldn’t care if you just want to watch a movie.

Remember, this isn’t like streaming video from the internet. It’s still content stored on the airplane, but it’s just sent wirelessly. So transmission speeds and quality shouldn’t be an issue. Each access point should support about 60 devices (but could do more), and each Virgin America aircraft will have 3 access points.

But here’s where it gets cool. The content that you see on the screen is now super flexible. Would you rather watch TV on your own device? Go for it. The movies, TV, etc can all be watched on any device, not just the seatback. Want to watch on your mobile phone? Sure. It doesn’t matter. The only restriction is that if you use your own device, you can’t see the newest movies.

The movie industry has what it calls “early release” content, which is really just movies that aren’t on DVD yet. This is offered for airplanes but not if you use your personal device. The studios are afraid you’ll steal it. Eventually they’ll hopefully get over that, but until then, that should be the only difference.

Likewise, the system will also work with the internet that Virgin America currently has through Gogo. That system is getting a big upgrade as well with Gogo’s new ATG-4 system.

This new system will help Gogo deal with speed issues. That means adding directional antennas that will not just look for the closest tower but also at ones further away that might have more bandwidth available. And in those ground towers which transmit the signal, there will be an upgrade to EV-DO Rev. B technology, which will help speed things up. Lastly, there will be two modems instead of one on the airplane. The upshot is four times more capacity on the airplane than what’s there today.

But this does bring up a question. If Virgin America is sticking with Gogo for internet, then why not use Gogo Vision to stream content instead of going with the competitor Lufthansa Systems? The answer to me seems simple. Gogo Vision doesn’t have a seatback solution – it’s just streaming media and it seems Virgin America wanted more.

The only downer about all this? It’s a LONG way off. The first install isn’t until the end of 2012. Virgin America decided to talk about it because testing of equipment has begun, so the airline knew someone would find out. New deliveries starting late next year will get the system. Current aircraft will be evaluated on a case by case basis to see if they’ll bother to configure with the new system or stick with what they have today.

Virgin America continues to show that it can innovate with the onboard product. Now, if only the airline could just find a way to make money. . .

This may sound crazy, but hear me out. There were two separate pieces of news last week concerning Virgin America and Frontier that got me thinking about a combination between the two. Both are low on cash and need to raise more. This is one way to do it. It may not be a good idea, but that’s never stopped airlines before.

The first piece of news was that Virgin America posted yet another awful loss in the first quarter of the year. How bad? The airline posted a negative 14.7 percent operating margin and a negative 22.2 percent net margin. There’s only $25 million in cash in the bank. Not good, but not surprising either.

On the other side, we saw Frontier parent Republic strike a deal with the pilots union. If the union members vote for the deal this week, they will agree to postpone a pay raise, cut back benefits, and extend the existing contract for an additional two years. In return, Republic will start a profit-sharing plan, put growth requirements out there for aircraft, begin the restructuring program by the end 2011, and raise cash.

How will the airline raise cash? Republic will raise “at least $70 million . . . through one or more debt issuances or other financings,” and the company will make a “good faith effort . . . to attract equity investment(s) in Frontier that would reduce the Company’s ownership of Frontier to a minority interest by December 31, 2014.” That’s right, Republic will do its best to become a minority shareholder in Frontier, effectively letting Frontier go it alone once again.

With this scenario set, I started thinking about a combination between the two. Frontier isn’t going to be able to get that $70m+ loan for cheap . . . unless Sir Richard Branson provides the loan at a low interest rate.

Meanwhile, if Virgin America buys a majority stake in Frontier, Branson will have his share in the combined airline diluted, so he can pump more money in to get back to the 25 percent foreign ownership cap. That seems crazy to pour more money into two airlines that are losing money, but a lot of the airline business is driven by ego and dreams and not business sense. (Reason #518 why the airline business has always sucked.) Then he would just need to find some other money people (American citizens, of course) to put more money in to help pad the cash cushion and provide the rest of the equity. That’s probably the hardest part.

For Republic, this makes some sense. It would undoubtedly keep flying Embraer 190 aircraft for Frontier but on a more traditional express capacity purchase arrangement. I imagine a deal like this could include deploying more of those airplanes into the current Virgin America system. So Republic gets out of Frontier (mostly) but keeps its airplanes flying with the new airline. The only thing it has to lose is its remaining investment in the combined airline, if it thinks that the airline’s fate could be worse than its current predicament (something that’s not entirely clear). Besides, who else is going to pony up the cash for Republic?

The rationale for Virgin America is less convincing. If Virgin America does this and takes over Frontier, it will undoubtedly end up standardizing around the Virgin America name and product. It can use that as part of the pitch to the money men. Can’t you see it? “Frontier is too similar to Southwest right now, so we’re going to leapfrog Southwest and create a killer product that will take people away from Southwest in droves.”

Does the Virgin America product work in Denver going up against heavy competition from United and a growing Southwest, regardless of product? I doubt it. People might like it, but they aren’t going to pay a lot more for it. And Virgin America’s superior product doesn’t come cheap. Besides, a lot of the flights from Denver are in the 2 hour range, when the onboard offering doesn’t matter nearly as much as on longer flights.

I know, this sounds crazy. Combining two airlines in trouble usually doesn’t make sense . . . or does it? America West and US Airways successfully did just that, but that was a different story. America West management went into US Airways in bankruptcy and cut costs, ditched airplanes, and basically cleaned the place up. The money flowed and that was a successful merger. (You can talk about the pilots not being merged if you want, but neither airline would exist at this point without that merger. It was successful.)

The problem here is that Virgin America and Frontier don’t have nearly as compelling of a story. What changes? Virgin America brings its brand to Denver and makes a better (pricier) product offering available. There are no great “synergies” between the two that will help wring out costs. But it does create a larger airline . . . with more cash. That doesn’t solve its problems but it buys more time to try to solve them.

Ultimately, something needs to happen with each of these airlines. They’re both short on cash and Republic has made it clear that it is in the market to raise money as part of this pilot deal. I just don’t see Branson backing down from Virgin America, so would he dig a deeper hole? This is the kind of scenario that, while not really making much sense to me, wouldn’t shock me at all if two things happen.

1. Branson would have to decide he’s willing to pour more money in the airline.
2. Branson would have to find more people willing to put money in as well.

What do you think?

[Original Virgin America Photo via Flickr User dtweney/CC 2.0]