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The climate is good for IPOs right now with Airbnb and Uber generating lots of talk. Can Virgin America catch that wave? It’s possible, but the airline may have to show more progress before it gets there.
Virgin America’s latest results show that it has finally reached a point where it can execute its niche.
It has proven to be a disruptor for fellow hybrid carrier Alaska Air Group in US west coast markets and created havoc for United Airlines when it launched new service from United’s Newark hub to San Francisco and Los Angeles in Apr-2013.
If Virgin America can keep a cost advantage, or better yet, focus on driving cost down while maintaining its revenue momentum, its prospects begin to look brighter. Its unit revenue and yield performance during 2013 were commendable, and its ability to grow its average fares without compromising load factor is a hugely positive development. Its campaign to change the dynamics at Dallas Love Field shows welcome initiative, and could create new opportunities for Virgin America to garner more than just high passenger praise for its product.
While it is encouraging to see Virgin America post tangible financial results to accompany its ever-present positive passenger accolades, its ambition to access the public markets during the latter half of 2014 may be assertive. Its stronger US counterparts Delta and United are working to attain investment grade status while other carriers like JetBlue are just brushing the surface of outlining attainable return on invested capital (ROIC) goals.
That Virgin America’s executives can reasonably discuss an initial public offering is an important achievement in convincing some long-time sceptics that the company actually has some staying power. While the company’s current investors have waited patiently for returns, and could be making a push for Virgin America to access the public markets, it might be wise to pause, enjoy the first whiff of profitability and craft a strategy to sustain its good fortune.
Virgin America’s share on its top 10 domestic routes and competing carriers: 31-Mar-2014 to 6-Apr-2014
|Route||Virgin America’s share||Competitors|
|San Francisco-Los Angeles||18%||American, Delta, Southwest, United|
|San Francisco-Las Vegas||28%||United, Southwest, US Airways|
|JFK-Los Angeles||14%||American, Delta, United, JetBlue|
|San Francisco-San Diego||21%||Southwest, United|
|JFK-San Francisco||14%||United, Delta, American, JetBlue|
|Los Angeles-San Jose||18%||Southwest, American, Alaska, Delta, United|
|San Francisco-Seattle||14%||Alaska, United, Delta|
|Los Angeles-Seattle||17%||Alaska, United Delta|
|Los Angeles-Newark||20%||United and American|
|Fort Lauderdale-Los Angeles||49%||JetBlue, Spirit|
This story originally appeared on CAPA – Centre for Aviation, a Skift content partner.
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