Virgin America (San Francisco) reported its financial results for the fourth quarter of 2011 and full year 2011.  Despite substantially higher fuel costs and financial pressures associated with industry-leading capacity growth, the airline narrowed its fourth quarter operating loss to $8.1 million (a 29 percent year-over-year improvement) and its fourth quarter margin to (2.9 percent) – an improvement of three points year-over-year.  The airline’s full year operating loss was $27.4 million on revenues of over $1 billion.  Top line growth remained strong with revenue gains significantly outpacing capacity growth.  Year-over-year, revenue grew by 45 percent for the fourth quarter and 43 percent for the full year on a 29 percent increase in capacity – compared to an industry average capacity growth rate of less than one percent in 2011.  The airline ended 2011 with $160 million in unrestricted cash.

Virgin America’s results were primarily impacted by high fuel costs and the costs of growth.  The airline also incurred costs associated with its transition to a new reservations system in 2011.  The cost per gallon of fuel increased by 38 percent in the fourth quarter and 33 percent for the full year versus the prices paid in the prior year.  This fuel cost increase reduced the airline’s operating profit by $31 million for the quarter and $105 million for the full year.  The airline’s rate of growth and entry into new markets created margin pressure which offset gains in more mature markets.  The carrier’s established markets (those operated for at least 12 months prior to the fourth quarter of 2010) were profitable for both the fourth quarter and full year 2011.  In these markets, revenue per available seat mile (RASM) improved by 18 percent year-over-year for the fourth quarter.

In late 2011, Virgin America reported that it raised an additional $150 million through a four and a half year debt facility.  The airline also noted that it obtained lease financing commitments for all of its Airbus A320 Family aircraft slated for delivery through September 2013.  In addition, the airline closed on a financing facility for the majority of its pre-delivery payment obligations (“PDPs”) due on the first 20 aircraft within its order of 60 Airbus A320s, scheduled to begin delivery in summer 2013.

Virgin America continued to drive significant growth in 2011:  expanding its fleet from 34 aircraft in January 2011 to 46 aircraft in December 2011 (as of May 1, 2012, the carrier operates 51 aircraft) and achieving major carrier status as defined by the Dept. of Transportation (DOT).

Copyright Photo: Ken Petersen.

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