Virgin America has cracked the airline growth code in the U.S. Despite a travel market slump that shows almost no signs of recovering and an industry with perpetual financial and operational woes, the start-up carrier has shown that strong financials don't have to be a dream for the embattled business. Only two years old, and living most of its life in a severe recession, Virgin America has demonstrated that airlines don't have to rely on bailouts.
For the third quarter of 2009, Virgin America posted revenues of $157.9 million, a year-over-year increase of 38.3%, largely because of improved unit costs and record load factors -- the latter improving by 5.2 percentage points to 86.6% from the same quarter the previous year. The increase was possible even with a 36.5% increase in scheduled service capacity. Meanwhile, costs per available seat-mile fell 33.9% -- 24.4% when you take fuel out of the equation. Virgin America was able to add capacity at a rather low marginal cost. Though privately held, the airline is disclosing its financial results ahead of Department of Transportation requirements.
"Despite an uncertain economic climate since our 2007 launch, we're pleased to report steady and strong financial performance and our first quarterly operating profit," said Virgin America President and CEO David Cush. "At a time when flyers are more discerning than ever, it is clear that our low fares, award-winning guest service and innovative amenities continue to convert a growing network of loyal travelers. We look forward to bringing our unique value proposition to more travelers as we grow in 2010 and beyond."
Virgin America's operational prowess contributed substantially to its powerful financial results. The airline attained an on-time performance of 87.2% -- to call this rare is an understatement. Mishandled baggage was also low, at an average rate of 1.18 baggage reports per thousand guests. The industry average is 3.72 baggage reports per thousand passengers.
Since kicking off in August 2007, Virgin America has flown 5.8 million passengers and has more than 1.1 million members in its loyalty program, an impressive platform for growth. It's clear that the airline, which is entirely separate from Virgin Atlantic, and in which Virgin Group is a minority shareholder, is poised for rapid market share capture in a market where sinking standards for customer service and operational struggles are making the competition vulnerable ... and are driving passengers to look for alternatives.