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Despite stalled growth in China, Brazil and Russia, a wave of newly middle-class travelers from the BRICs and beyond will start visiting international destinations in the coming decades — dwarfing the numbers we’ve seen thus far.
Airlines are looking towards an austere winter and airfares will likely increase should other airlines follows Virgin’s proactive solutions.
Virgin America Inc., the low-fare airline partly owned by U.K. billionaire Richard Branson, will trim capacity by 3 percent in the first quarter and is offering voluntary short-term leave to employees to cut costs in the seasonally weak winter period.
The January to March period is “challenging” for the industry, especially because Virgin America’s coast-to-coast routes often “underperform in the winter months,” Chief Executive Officer David Cush wrote in a letter to employees last week. The airline’s network doesn’t allow it to easily shift planes to shorter north-south “sun routes” that are more popular in the cold months, he said.
Recent unit-revenue figures by competitors including United Continental Holdings Inc. and Southwest Airlines Co. were “lackluster projections” that “point to a softening environment” and necessitate Virgin America’s cutbacks, Cush wrote.
“The forecast for the first quarter of 2013 indicates it will be a tough winter for the industry,” Cush said.
Virgin America will eliminate some flights that are traditionally unprofitable during the first three months of the year such as red-eyes and midweek flights, and will restore that service in April when demand typically improves, he said.
The Burlingame, California-based company won’t furlough employees, and is instead seeking voluntary reductions through short-term leave and flex scheduling, he wrote. He didn’t say how many positions are targeted for reduction, and Jennifer Thomas, a spokeswoman, didn’t have a figure to share.
The company has about 2,600 employees and reported a net loss of $31.76 million for the second quarter, 46 percent wider than the same period a year earlier. Virgin America ended the quarter with $82 million in unrestricted cash.
Earlier this month, United said revenue for each seat flown a mile fell 2.5 percent to 3.5 percent for September and Southwest reported revenue on that basis dipped 2 percent to 3 percent.
Virgin America, which started service in August 2007, has a fleet of Airbus SAS A320 jets and flies to cities including San Francisco, Los Angeles, Las Vegas, New York’s John F. Kennedy airport and Boston.
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