Virgin America posts 2.4% drop in Q3 operating income

Washington DC
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Virgin America saw operating income drop 2.4% year-over-year from $15.8 to $16.2 million in the third quarter.

Operating margins fell from 5.6% to 4.3%. The carrier attributes the decrease to weaker performance in new markets that offset the 8% margin that its mature markets saw during the period.

The airline bolstered its operating revenues during the third quarter by 26.6% to $368 million, up from $291 million in the same period a year earlier. However, it incurred higher operating expenses in each category on its balance sheet, including a 29.7% rise in fuel expenses. Aircraft maintenance also grew by 7% and depreciation figures were up by more than half to $2.95 million.

Available seat miles (ASMs) increased by 31% year-over year, and departures were up 29.6%. Load factor decreased by 4.6 percentage points to 79.6% versus 84.2% in the same period a year earlier.

Virgin says it plans to post a profit in the fourth quarter as well, despite challenges of high fuel prices and capacity growth. The airline is taking measures to curb the latter with a newly-unveiled deferred fleet growth plan.

The airline cut its A320 order for 30 aircraft with current engines to 10 and plans to receive them in 2015 and 2016. It also pushed back its 30 A320neo orders for delivery between 2020 and 2022, instead of receiving the first aircraft in the first quarter of 2016.

With these fleet changes, Virgin America expects to see its ASM growth will decelerate from the 28% rate it has averaged for the past three years.