Virgin America reports a first quarter operating loss of $29.5 million

Virgin America (San Francisco) yesterday reports its financial results for the first quarter of 2011 (ending on March 31). Virgin America reported a $29.5 million operating loss with its operating margin remaining steady at (14.7) percent. The airline reported strong revenue performance with $201 million in revenues for the first quarter – a 37 percent jump in revenue versus the first quarter of 2010. Virgin America continued to deliver significant unit revenue performance even as it ramped up in new markets, with a 12 percent improvement in revenue per available seat mile (RASM) year-over-year – a period in which the domestic industry’s RASM increased by 10 percent. The airline’s mature capacity RASM growth exceeded this, with performance in the carrier’s established markets improving by 20 percent year-over-year. During the quarter, the carrier’s scheduled capacity increased by 23 percent, compared to the domestic industry’s average capacity increase of one percent for the same period.

The company blamed the loss on the rising cost of fuel:

“Investment in growth and increased fuel prices accounted for the cost increases for the carrier year-over-year.  The financial pressures of growth reduced first quarter operating results by $13 million, when accounting for the additional investment in capacity and the revenue ramp up associated with new routes.  Operating expense per available seat mile excluding fuel (ex-fuel CASM) increased by 5 percent over the year earlier quarter, as a result of cost of idle capacity, primarily new teammates in training and new aircraft being modified to Virgin America standards.  Although the airline’s new Airbus A320 Family fleet is up to 25 percent more fuel efficient than other domestic fleets, sharply rising fuel prices remained a challenge during the quarter.  The skyrocketing cost of fuel accounted for 30 percent of the airline’s fuel cost increases year-over-year.  The cost per gallon impact of fuel increased operating expense by $17 million over the increase attributed to the airline’s growth.  Crude oil hedges offset $4 million of the airline’s overall fuel cost increase.  A significant portion of the rise in jet fuel costs is due to the record high crack spreads experienced in February and March.”

Despite the operating loss, Virgin America is growing its fleet from 28 aircraft in service in the first quarter of 2010 to a projected 52 aircraft by the second quarter of 2012.

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Copyright Photo: Bruce Drum.