Start-up airline Virgin America narrows 3Q loss

AP News
Posted: Dec 11, 2009 11:36 AM

Virgin America Inc. reported a narrower loss for the third quarter, and the CEO said the airline will add planes and service to a new city _ most likely Chicago.

The two-year-old airline reported Friday that it lost $5.9 million in the third quarter, compared with a loss of $59.1 million a year earlier. Revenue climbed 38 percent, to $157.9 million.

The carrier said traffic rose 45 percent while passenger-carrying capacity increased by 37 percent, meaning planes were fuller than in last year's third quarter.

Virgin America, about 24 percent owned by British billionaire Richard Branson's Virgin Group, is a small player in the crowded U.S. airline space, serving just 10 cities. It caters to California travelers and competes with JetBlue Airways in the low-fare, amenity-rich niche.

The airline has dreams of growing bigger. CEO David Cush said in an interview that he will add six to eight planes to the company's fleet of 28 Airbus jets next year and probably launch service to O'Hare Airport from Los Angeles and San Francisco.

Cush said his airline would face little low-fare competition on the California-to-Chicago routes flown by United and American, but won't fly to O'Hare from New York, where there is more service from other carriers.

From a financial standpoint, Cush's goal is to achieve the cost structure of JetBlue _ "We can't get down to where an AirTran or Spirit or even a Southwest Airlines is" _ while making just as much revenue per seat as the big boys: Delta, American and United.

Cush conceded the airline still has a ways to go on both counts.

Beyond next year, plans call for adding 12 more aircraft in 2011 and possibly beginning service to Texas _ either Dallas or Austin.

Dallas is bigger, but Virgin would face "the 800-pound gorilla" of American Airlines, which is based at Dallas-Fort Worth International Airport, "so we're going to be careful about that," Cush said.

Austin, with its tech-heavy economy, would be a nice pairing for Virgin's base in San Francisco, he said.

The airline's expansion plans assume that the economy will improve modestly next year and that other airlines won't expand rapidly. In past recoveries, airlines have been quick to add flights, but Cush doesn't think that will happen this time.

In past downturns, airlines flew their planes less often but didn't prune their fleets. "This time, they retired planes," Cush said.