Wings Magazine

Virgin America reports first net income

Nov. 10, 2010, Dallas, TX - Startup airline Virgin America said Tuesday that it's making money for the first time thanks to higher fares.

November 10, 2010  By The Associated Press

CEO David Cush said the company will grow its fleet aggressively next year and hopes to expand to Chicago and Newark, N.J.

The 3-year-old low-cost airline backed by Richard Branson said it earned $7.5 million in the July-through-September period, compared with a loss of $5.9 million a year ago.

Revenue jumped 28 per cent to $202 million, and passenger revenue per mile rose 20 per cent, which Cush said was due to higher fares.

Cush said the privately held company plans to increase its fleet from 28 Airbus planes to 40 by the end of 2011. That will produce an increase in capacity of 35 per cent.


U.S. airlines have benefited this year from holding down capacity, which drives up fares. Recently, many of the airlines have been adding flights compared to the lean schedules they operated in the fall of 2009, but Cush said he isn't overly worried that too many new flights will push down fares.

Cush said his biggest concern was rising fuel prices. Virgin America is paying extra to lock in maximum prices for 86 per cent of its fuel the rest of this year, a strategy that Southwest Airlines used to insulate itself from record fuel prices in 2008.

"Airlines as an industry had a near-death experience in the summer of 2008 with fuel prices,'' Cush said. "We decided we would never put our company in that position again.''

Virgin America plans to start service next month to Dallas, and to Los Cabos and Cancun in Mexico over the next two months.

Cush said the airline is negotiating with city officials in Chicago for gates at O'Hare Airport. Virgin also wants to fly to Newark, part of the New York-area market, but it was shut out when United and Continental made a deal to shift some of their takeoff and landing slots to Southwest Airlines Co.

Virgin America flies to San Francisco, Los Angeles, New York, Washington D.C., Seattle, Las Vegas, San Diego, Boston, Fort Lauderdale and Orlando, Fla., and Toronto.

United and AMR Corp.'s American Airlines are Virgin's biggest competitors, overlapping on about 80 per cent of Virgin's traffic. Expanding to Texas will put the young carrier in even tougher head-to-head competition with American, which dominates at Dallas-Fort Worth International Airport.


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