Virgin America Inc., the low-fare airline partly owned by U.K. billionaire Richard Branson, narrowed its first-quarter net loss by 39 percent and restructured debt to lower interest expenses.
Virgin America also modified terms with some creditors, which eliminated $290 million of debt and will trim interest expense in the second half of the year by two-thirds, to $20 million. The deal was “a first step” toward preparing for a public offering that may occur as soon as next year or 2015 depending on the broader markets and Virgin America’s performance, said Chief Executive Officer David Cush.
The closely held carrier, which began flying about six years ago, is trying to achieve profitability in the second half of this year and won’t add to its fleet of 53 jets until 2015 as it pauses growth, Cush said.
“When you’re growing as rapidly as we’ve been growing, it’s very difficult to grow profitably,” Cush said in a telephone interview.
“When we’re in a market for 18 months or longer, we’re highly profitable,” he said. “It’s just that we’d have 30 to 40 percent of capacity in new markets that were highly unprofitable. We’re letting the network mature.”
The carrier’s operating deficit was $46.4 million for the first three months of the year, compared with $76 million in the same period a year ago, according to a statement. Revenue rose 13 percent to $301.3 million.
Virgin America also borrowed an additional $75 million after the first quarter ended, said Chief Financial Officer Peter Hunt. The Burlingame, California-based carrier had about $800 million in debt before that, he said.
Besides Branson’s Virgin Group, other investors include New York-based Cyrus Capital Partners and Don Carty, former chairman and CEO at American Airlines parent AMR Corp.
Virgin America, which started service in August 2007, has a fleet of Airbus SAS A320-family jets and flies to cities including San Francisco, Los Angeles, Las Vegas, New York and Boston.
Editors: James Langford, John Lear. To contact the reporter on this story: Mary Jane Credeur in Atlanta at [email protected] To contact the editor responsible for this story: Ed Dufner at [email protected]