Virgin America posts 2012 loss, but sees profitable 2013

Washington DC
Source:
This story is sourced from Pro
See more Pro news »

Virgin America has confirmed another year of losses for 2012, but the airline's chief executive says a financial restructuring, an injection of capital and improving results point to the airline earning "healthy" profits in 2013.

Privately-owned Virgin America posted an operating loss of $31.7 million in 2012, roughly in line with the airline's $27.4 million operating loss in 2011.

The carrier's net loss for the year was $145.4 million, compared to a of $100.4 million in 2011.

Virgin America also released results for the last two quarters, reporting an operating loss of roughly $15 million for the first quarter of 2013 and an operating profit of $5.1 million for the fourth quarter of 2012.

The fourth quarter profit was the airline's first during that period.

The carrier, launched in 2007, has not yet reported a full year profit, despite projections by chief executive David Cush that it would be in the black in previous years.

But Cush tells Flightglobal Virgin America has now turned a corner. "We have finally written the last chapter on our startup phase," he says. "The projections for the remainder of the year are to have a very healthy operating profit and a margin that would be at the top half of the industry."

Cush says Virgin America has bolstered its finances in recent months and improved in key financial and operational indicators.

During the last six months, the airline has undergone a financial restructuring that has led to an agreement with investors to modify the interest rate on a large amount of debt, the airline says. The process also resulted in the elimination $290 million in debt and $20 million in accrued interest, the airline says.

In addition, Virgin America says it recently closed a deal to receive $75 million in new debt financing.

As a result, the company expects interest expenses for the second half of 2013 to be about $20 million, one-third of the company's interest expenses in the second half of last year.

Cush says these developments give Virgin extra liquidity and make its debt position similar to that of other airlines.

"The investors were interested in putting more money in the airline to make sure we have liquidity levels closer to the industry," Cush says, adding that the airline would not have been in dire financial trouble without it.

Cush says Virgin America is on track to having a balance sheet that is attractive to investors, an important step in the airline's long-stated desire to go public.

He says an initial public offering will not come in 2013, but could happen in 2014 or 2015 if "conditions are right."

The airline notes other positive trends.

Its first quarter 2013 operating loss of $15 million was $33.6 million less than the same period in 2012, when operating losses were $48.6 million.

Also in the first quarter, revenue per available seat mile jumped 18% year-over-year, a rate that outpaced other carriers, Virgin America says. And the airline's average fare climbed 19% in the first quarter, year-over-year, to $201.

Cush attributed the fourth quarter profit and improved first quarter results largely to a plan to slow growth and operational changes.

In 2012 the carrier completed a two-year growth phase that included taking delivery of 25 aircraft. Many of those aircraft were deployed on new routes, which the carrier says dragged down its financial performance.

Now that growth phase is over, allowing Virgin to mature in the markets where it operates, the airline says.

Virgin, which does not expect to increase its fleet until 2015, also eliminated some off-peak flights, including cross-country overnight trips.