Low-cost carrier Virgin America needs to revisit its business strategy to make itself more investable, says a Wall Street analyst.
"They are in a niche that is not as attractive to us," says Andrew Davis, vice president of T. Rowe Price, speaking at the Boyd Group International Aviation Forecast Summit in Baltimore.
Saying that Virgin America's strategy is a "long-dated story to get to profitability", Davis says the airline's growth strategy is not based on return on invested capital and is not rational.
"Spirit [Airlines] is growing as fast as they are but in a niche that makes sense," he adds.
Virgin America posted an operating loss of $31.7 million in 2012. It made an operating profit of $12.9 million in the first half of 2013, but posted a net loss of $37.5 million during the period.
The airline has in recent years transformed into a carrier catering to business travellers from a leisure-focused airline, but Davis questions this change as the airline has placed itself in direct competition with many legacy carriers in markets like Los Angeles and San Francisco.
In comparison, Spirit positions itself as the airline of choice for price conscious travellers who travel for leisure or to visit friends and family. The carrier posted $174 million in operating profit in 2012 and net profit of $108 million.