VIRGIN AMERICA REPORTS FIRST QUARTER 2011 FINANCIAL RESULTS

Airline Reports 37 Percent Increase in Operating Revenues Year-Over-Year

San Francisco – June 10, 2011 – Virgin America today reports its financial results for the first quarter of 2011. Against the headwinds of significantly higher fuel prices and the resumption of its rapid growth, Virgin America reported a $29.5 million operating loss with its operating margin remaining steady at (14.7) percent. The airline reported strong revenue performance with $201 million in revenues for the first quarter – a 37 percent jump in revenue versus the first quarter of 2010. Virgin America continued to deliver significant unit revenue performance even as it ramped up in new markets, with a 12 percent improvement in revenue per available seat mile (RASM) year-over-year – a period in which the domestic industry’s RASM increased by 10 percent. The airline’s mature capacity RASM growth exceeded this, with performance in the carrier’s established markets improving by 20 percent year-over-year. During the quarter, the carrier’s scheduled capacity increased by 23 percent, compared to the domestic industry’s average capacity increase of one percent for the same period.

“Despite the financial challenges of growth and rising fuel costs in the first quarter, we remain pleased with our revenue performance and overall progress as a young airline in a significant growth phase,” said Virgin America President and CEO David Cush. “While we are disappointed that our operating results fell short of our expectations primarily due to fuel prices, we are encouraged that we were able to recover over half of the sharp fuel increase through revenue gains. Our strong sales performance and recent expansions to major business and leisure destinations such as Dallas-Fort Worth and Chicago forecast a strong overall picture for 2011 and beyond.”

Investment in growth and increased fuel prices accounted for the cost increases for the carrier year-over-year. The financial pressures of growth reduced first quarter operating results by $13 million, when accounting for the additional investment in capacity and the revenue ramp up associated with new routes. Operating expense per available seat mile excluding fuel (ex-fuel CASM) increased by 5 percent over the year earlier quarter, as a result of cost of idle capacity, primarily new teammates in training and new aircraft being modified to Virgin America standards. Although the airline’s new Airbus A320 Family fleet is up to 25 percent more fuel efficient than other domestic fleets, sharply rising fuel prices remained a challenge during the quarter. The skyrocketing cost of fuel accounted for 30 percent of the airline’s fuel cost increases year-over-year. The cost per gallon impact of fuel increased operating expense by $17 million over the increase attributed to the airline’s growth. Crude oil hedges offset $4 million of the airline’s overall fuel cost increase. A significant portion of the rise in jet fuel costs is due to the record high crack spreads experienced in February and March.

As one of the few growing U.S. airlines, Virgin America continues to expand its fleet, growing from 28 aircraft in service in the first quarter of 2010 to a projected 52 aircraft by the second quarter of 2012. In line with the airline’s overall growth trend, Virgin America continued to expand in the first quarter of 2011, with 35 average aircraft in service during the quarter – a growth rate of 25 percent from the year earlier period. With the addition of the carrier’s award-winning service to more new markets, including Dallas-Fort Worth, Los Cabos, Cancun and Orlando, the number of guests flown in the first quarter topped one million – up 14 percent over the year earlier period.

The airline has seen significant year-over-year increases in traffic, bookings and average fares in the second quarter of 2011. The airline will release its second quarter results later this summer.

“As a young airline, we must balance the need for expansion against the financial pressures that accompany growth. Adding service to four new cities during a short window is no small task for a new airline. However, our Company and teammates rose to the challenge and performed well – and our new markets continue to mature quickly. Our strong revenue performance, consumer enthusiasm for our unique product and the cost leverage we continue to gain from scale as we grow, will allow us to keep building a successful airline as we emerge from our current growth cycle,” added Cush.

First Quarter 2011 Reporting Highlights:

  • Operating results: The airline reported a $29.5 million operating loss in the first quarter. The airline’s yield per passenger mile was 11 cents, up 13 percent compared to first quarter 2010.
  • Load factors: The airline reported a 76 percent load factor in the first quarter, on a 23 percent increase in scheduled service capacity over the year earlier quarter – compared to the industry’s average capacity increase of one percent.
  • Top line progress: RASM gains continued to outpace industry RASM gains, with a RASM increase of 12 percent over first quarter of 2010 – a period in which the domestic industry’s RASM increased by 10 percent. Mature capacity RASM exceeded this, with performance in the carrier’s established markets improving by 20 percent year-over-year. (New markets represented all of the airline’s capacity growth in the quarter and made up 19 percent of the airline’s total capacity in the quarter). Stage-length adjusted guest unit revenue was up 17 percent versus the year earlier quarter. Average fares increased by 22 percent over the year earlier quarter.
  • Cost control: Operating expense per available seat mile excluding fuel (ex-fuel CASM) increased by 5 percent over the year earlier quarter, primarily as a result of investment in the Company’s growth (training, people and aircraft in modification) and the sale and leaseback of two A319 aircraft in December 2010.
  • Cash: The airline ended the quarter with $25 million in unrestricted cash and $54 million in total liquidity.

In response to the challenging fuel environment, Virgin America continued to hedge to help manage volatility. The airline hedged 50 percent of its 2011 projected fuel requirements, with 77 percent of its first quarter 2011 requirements hedged at an average crude oil call strike price of $82 per barrel.

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 key operational statistics in advance of the DOT’s requirement to report. For the first quarter of 2011, Virgin America achieved an 83.5 percent cumulative A-14 on-time ranking, which would place the carrier second for on-time performance among all reporting U.S. carriers for the quarter. Virgin America also outperformed the majority of the industry with a 98 percent completion factor, which would place the carrier third among all reporting U.S. carriers when compared to the DOT’s reportable data. The airline’s baggage handling rate for the first quarter was .99 mishandled baggage reports per 1000 guests, which would place it first among all reporting U.S. carriers for reliability in the first quarter, when compared to DOT’s reportable data.

Since its 2007 launch, Virgin America has experienced record-setting growth – with 2,000 new jobs created, more than twelve million guests flown and a sweep of the major reader-based travel awards, including “Best Airline” in both Condé Nast Traveler’s Readers’ Choice Awards and Travel + Leisure’s World’s Best Awards. In the spring of 2011, the airline became an anchor tenant at San Francisco International Airport’s (SFO) new sleek and sustainable Terminal 2 (T2).

Other key milestones achieved in the first quarter of 2011 include:

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

Virgin America financial information

Virgin America financial information

# # #

Media Contact: Abby Lunardini (650) 533-7576 / abby.lunardini@virginamerica.com

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.

About Virgin America: Headquartered in California, Virgin America offers guests attractive fares and a host of innovative features aimed at reinventing air travel. In just over three years flying, Virgin America was named “Best Domestic Airline” in the Condé 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. Virgin America is a U.S. owned and operated airline that has created 2,000 jobs and welcomed more than 12 million guests since its August 2007 launch. The airline’s current base of operations is San Francisco International Airport (SFO). In April 2011, the airline became an anchor tenant at SFO’s new sleek and sustainable Terminal 2. Virgin America flies to San Francisco, Los Angeles, New York, Washington D.C., Seattle, Las Vegas, San Diego, Boston, Fort Lauderdale, Orlando, Dallas-Fort Worth, Los Cabos, Cancun and Chicago. For more, please visit: www.virginamerica.com

<< Back To Press Release
Our Frequent Flyer Program
What's Elevate? Earn Points
Our Blog Our Airline Partners © Virgin America