Virgin America to post another year of losses in 2012, says CEO

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Virgin America will not report a profit in 2012 but will likely see profits in both 2013 and 2014.

The airline lost money last year as it struggled with continued high fuel prices and costs associated with rapid expansion, chief executive David Cush tells Flightglobal today on the sidelines of a Virgin America event at Newark Liberty International airport marking the launch of the airline's new flights.

Cush had said last year that 2012 would be six-year-old Virgin America's first profitable year.

The effects of higher costs will be seen in the airline's 2012 financial results, which Cush says should be released in May.

Cush adds that Virgin America's decision last year to slow growth in the coming years will allow it to better manage fuel costs and could result in a strong profit in 2013 and a stronger profit the following year.

He says the airline's financial predictions assume fuel prices will not decline.

Virgin America announced last year that it would cut capacity by 3.5% in early 2013. Virgin, which has 53 aircraft and flies to more than 20 destinations, also offered voluntary short-term leave to some employees.

In addition, last year the airline announced it had cut an order for 30 Airbus A320 aircraft by two-thirds and will only take 10 of the aircraft. Virgin America also delayed by four years - until 2020 - delivery of new A320neos.

The airline has 30 A320neos on order

Cush says the 3.5% capacity cut has been reinstated with the new Newark flights. The airline entered the Newark market on 2 April with three daily flights to both San Francisco and Los Angeles.

Virgin America's aircraft utilisation will be 13 hours daily by June, the highest utilisation rate in the airline's history, Cush added.

Virgin America executives say the airline's marketing strategy focuses on entrepreneurs, employees of small businesses and younger business travellers.

Director of guest loyalty Phil Seward tells Flightglobal that 25% of Virgin America's customers work for businesses with fewer than 25 employees. Many of those customers, he say, book travel directly with airlines rather than through a corporate travel agent, as employees at larger firms tend to.

The average age of a Virgin America customer is 44, which is probably slightly younger than other airlines' customers, say Luanne Calvert, Virgin America's vice president of marketing.

She says the airline wants travellers to see the Virgin America flying experience as unique, noting that its aircraft have interactive inflight entertainment systems, mood lighting and wireless internet access.

By comparison, Calvert says only 5% to 10% of planes flown by competing airlines on the same Newark routes offer wireless access.

"Five hours on a flight - you can develop a whole new business plan in that time," says Calvert.

The airline wants customers to be able to do the same things in the air that they can do on the ground - like order food, drinks or movies from their seat, she adds.

Executives decline to speculate on when Virgin America expects to roll out the latest version of its "Red" inflight entertainment system.

The updated system had been scheduled to be introduced late last year but was delayed due to changes to the fleet plan.

Seward says the airline expects that the new system will be more "personalised." For instance, customers may be able to log on to the system at home and create music playlists to listen to on the flight, Seward says.