Virgin America

US carriers gain access to their strongholds through new Washington National slot allocation

Four US carriers have won rights to launch flights from slot-controlled Washington Reagan National Airport to serve markets where they are dominant or have a strong presence. Southwest Airlines and Virgin America are gaining access to National for the first time, while JetBlue will expand its blossoming presence at the airport. The new services should usher in some fare rationalisation in those markets as the carriers seek to challenge United’s dominance in the Washington market from its hub at Dulles International Airport, which is about 56km from National.

US lawmakers in the latest FAA Reauthorisation bill signed into law earlier this year included a provision freeing up four outside perimeter (beyond 2,011km) slot pairs for new entrant or limited incumbent carriers at National, which is located only about 6km from the US capitol. Carriers already having an ability to operate flights outside the perimeter were also allowed to trade in a single pair of inside perimeter slots for new outside perimeter service. A slot pair consists of one take-off and one landing slot.

Spirit and Virgin America show drasticially different outcomes from capacity growth

US carriers Spirit Airlines and Virgin America recorded higher than average capacity growth during 2011. But the similarities ended there as Spirit recorded healthy profits that continued into the first quarter of this year while Virgin American continued to mount losses as fuel expense and the spool-up of new markets continued to the crimp the carrier’s bottom line.

While Virgin America concludes it is still in growth mode, it has only recorded one profitable quarter in its five-year history, and only four quarters of operating profits. Unlike Spirit, Virgin America largely operates to legacy strongholds, attempting to lure passengers away from network carriers with its highly-regarded in-flight experience. Although the carrier continues to rack up numerous awards for its service, the business case has yet to be proven.

Virgin America targets US Airways with launch of Philadelphia service in April

Virgin America will continue its strategy of targeting fortress hubs with service to Philadelphia commencing in Apr-2012 from Los Angeles and San Francisco. Virgin America will take approximately one-quarter market share on both routes at the main expense of Philadelphia's hub carrier, US Airways. Philadelphia is a key step in the development of Virgin America's network as it will give the carrier service to all five of the largest metropolitan areas in the US and eight of the top 10, with only Atlanta and Houston still missing from its network but likely to be added before the end of 2012.

Virgin America's first flights to Philadelphia, its 17th city, will arrive on 05-Apr-2012 with double daily service from Los Angeles on the carrier's 137-seat A320s. A third daily frequency will be added on 01-May-2012. Services from Virgin America's San Francisco hub commence 10-Apr-2012 with one daily frequency, increasing to double daily on 01-May-2012.

Virgin America closes 3Q facing stiff headwinds for 2012, but still breaking even

As most of the US airline industry was collectively earning over USD1 billion in the third quarter, Virgin America joined Southwest and American in posting losses. The San Francisco-based carrier posted USD3.3 million in losses – a paltry sum compared to the USD140 million loss at Southwest, and relatively positive news considering the airline's overall financial performance.

The story for Virgin America was much the same as for the rest of the US industry and is likely to be repeated in the fourth quarter and the new year. That story is a frustrating one of rising revenue on falling profits, meaning costs often outstripped revenues.

For its part, Virgin posted an operating profit of USD16.2 million for the third quarter resulting in a 5.6% operating margin, the carrier said, which was down 4.8 points from 3Q2010, when Virgin posted its first net profit, indicating the carrier is still working towards sustainable profitability.

US airlines’ ancillary revenues continue to grow, but at a slower pace for legacy carriers

The US Department of Transportation (DoT), through the Bureau of Transportation Statistics (BTS), has released second quarter data which provides some interesting numbers for consideration. Looking at the ancillary revenue collected by carriers, we find that the amounts collected continue to grow, but for most legacy airlines at a slower pace. The overall year-on-year total increased only 5%.

However, passengers flying Spirit had a quite different experience and despite its general “no fees” image, Southwest has increased its take from fees by 10% over the year.

Slots continue to make news in the US, first at New York and change comes to SFO

The US aviation landscape is again being affected by the scarcity of capacity in two of the nation’s important metro areas. Last week the FAA gave its blessing to the slot swap between Delta and US Airways at New York’s LaGuardia and Washington’s Reagan.