Virgin America posts 1Q loss as fuel costs bite

Washington DC
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Virgin America has reported a $44.6 million net loss for the first quarter.

The San Francisco-based airline incurred a $35.5 million net loss during the same period last year.

The airline's operating loss also widened, from $21.6 million in the first quarter of 2010 to $29.5 million in 2011. Virgin's operating margin, however, held steady at -14.7%.

"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," said Virgin America CEO David Cush.

Cush added that "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".

The carrier, which launched operations in 2007, saw first quarter operating revenues rise 37% year-over-year to $201.1 million. Operating expenses similarly rose 36.9% to $230.6 million. Virgin's fuel costs rose 52.9% year-over-year, to $83.4 million, as fuel consumption increased 21.6% and its per gallon cost of fuel rose 25.6%.

"The cost per gallon impact of fuel increased operating expense by $17 million over the increase attributed to the airline's growth," said the airline. Virgin also noted that "crude oil hedges offset $4 million of the airline's overall fuel cost increase".

Virgin's first quarter capacity was 22.8% higher year-over-year, while traffic increased 22.6%. As a result, the airline's load factor decreased by 0.2 points, to 75.7%.

"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," said the carrier.

The airline saw its unit costs, as measured by cost per available seat mile (CASM), increase 11.6% year-over-year to 10.61 cents. CASM excluding fuel increased 5.3%, "primarily as a result of investment" in growth as well and "the sale and leaseback of two A319 aircraft in December 2010", according to the carrier.

Meanwhile, revenue per available seat mile (RASM) also rose 11.6% compared to the first quarter last year, to 9.25 cents. "Mature capacity RASM exceeded this, with performance in the carrier's established markets improving by 20% year-over-year," said Virgin America.

Virgin American said it had "$25 million in unrestricted cash and $54 million in total liquidity" at the end of the first quarter. The carrier had previously reported that it had "$30 million in unrestricted cash and $66 million in total liquidity" at the end of 2010.