Virgin America are my favourite US airline but accumulated losses are approaching $US671 million. How long will this be tolerated for?
I recently read a great post about Virgin America by Brad Tuttle. He says they are “failing”. My interpretation from his article, is that he is saying, like many airlines before them, Virgin are suffering from the syndrome: Great Airline- lousy business. This phrase was coined by former Ansett CEO Rod Eddington before that airline collapsed.
What do you think?
Virgin America Safety Briefing: http://www.youtube.com/watch?v=j6ixjc5yeMU
Pretty funny that you posted this on the day that Virgin America reported an operating profit for Q3 and expected profits in Q4.
No accident!
http://news.gnom.es/pr/virgin-america-reports-third-quarter-2012-financial-results
well, you are not saying anything…What is the problem with VA? Why are they losing money? I don’t fly them, but would like to know more about them. All you are telling me is that they may go under
@Timmer, please use VX (VA generally refers to Virgin Atlantic).
I’ve flown Virgin and liked the experience a lot. I prefer Jetblue, since the people are nicer, more legroom, free bag, etc. But the Virgin experience still dominates that of the legacies and is one that is pleasant.
The problem for Virgin is a business one. They fly predominantly in markets that are ultra-competitive (JFK-LAX/SFO). There aren’t any routes where they command a revenue premium, let alone be the only carrier serving it. And you know there is a healthy dose of “kill virgin” pricing in the markets they serve. Next, their planes are cheap and the crew young, but the configurations they use are expensive (heavy IFE and first class seats mean they burn a lot of fuel relative to the aircraft age). For a legacy airline, that would be fine, as there are premium passengers to buy expensive, last-minute fares. But Virgin does not have many of those. So pair that with the competition, and price sensitive leisure customers will likely chose another airline.
CEO David Cush is right that VX needs enough size to convince true business road warriors to fly Virgin (as every flight on VX is miles/status not being earned on another airline, and miles not accruing to be redeemed for family vacation to places like Hawaii or Caribbean), but how much money can they lose while adding enough cities, routes, and frequencies to become relevant?
Virgin can fill planes without a problem. They can’t seem to fill planes profitably.
I wish them the best of luck, but it appears that a failed leadership team and poor route selection may doom this well-liked airline…
(And yes, I saw the quarterly operating profit, but one quarter is hardly turning a corner or any solid proof. Think about it, they have $75 million in cash, and have lost 10x that in the past few years, and only made $130 million PRE-TAX)
sorry, profit of $15 million
hate to keep correcting myself, but operating profit of $15.8 million, but overall net loss of $12.6 million. On the right track, but still not close to being there
and in the background of hundreds of millions of dollars or losses.