The Takeoff Episode 02: How Startups Can Adapt and Pivot Sponsored This content is created collaboratively with one of our sponsors.
There has been a lot of skepticism about whether Virgin America could turn itself into a profitable airline. It still faces tremendous competition and big-time challenges, but today’s earnings announcement was a hopeful sign for an airline that a lot of people feel very good about.
Until Virgin America showed up in April, United Airlines was the sole carrier flying Newark-San Francisco nonstops, and when you add in the Los Angeles-Newark nonstops that Virgin America introduced at the same time, the Newark operation was running in the black in the second quarter.
That’s the word from Virgin America CEO David Cush, who tells Skift that its San Francisco-Newark and Los Angeles-Newark flights, which greatly expanded Virgin America’s presence in a key business travel market, the New York City area, are operating ahead of expectations.
Cush cautioned, however, that summer travel can sometimes be very kind to airlines, so Virgin America will need more time to discover whether the Newark-Los Angeles and Newark-San Francisco routes will indeed be profitable over the long term.
That upbeat development comes with some more positive news for the airline: Virgin America recorded its first Q2 profit. The airline generated net income of $8.8 million in the second quarter of 2013, compared with a whopping $31.8 million loss a year earlier.
Total operating revenue rose 8% to nearly $378.1 million.
“Our first ever second-quarter net profit and year-to-date operating income show that our company is now poised to produce meaningful profitability,” Cush stated in the earnings announcement. “As we have reduced our growth from the 30 percent-plus level of the past few years to a more sustainable rate, our network has begun to mature into a profitable one, and our markets continue to show industry-leading RASM growth. We have always said that once people fly with us, they stick with us, and the second quarter is a testament to that and to the hard work of our team.”
Virgin America is in the midst of a transition. After taking delivery of 24 aircraft between the second quarter of 2010 and the second quarter of 2012, Virgin America essentially took a timeout from that relatively hyper growth at the end of last year, and trimmed staff and expenses.
And, in May 2013 Virgin America restructured its debt, wiping out some $300 million in debt and accrued interest, the airline states.
And, now after recording its first Q2 profit, the airline stated it expects continued financial improvement through the rest of 2013.