Virgin America announces 1Q11 financial results

Against consistently increasing fuel prices and the resumption of its rapid growth, Virgin America has reported a $29.5 million operating loss for the first quarter of its financial year.

The airline reported strong revenue performance with $201 million in revenues for the first quarter – a 37% increase compared with the first quarter of 2010.

Virgin America says it continued to deliver significant unit revenue performance even as it ramped up in new markets, with a 12% improvement in revenue per available seat mile (RASM) year-over-year – a period in which the US domestic aviation industry’s RASM increased by 10%. During the quarter, the carrier’s scheduled capacity increased by 23%, compared with the domestic industry average capacity increase of 1% for the same period.

“Despite the financial challenges of growth and rising fuel costs in the first quarter, we remain pleased with our revenue performance and overall progress as a young airline in a significant growth phase,” commented Virgin America president and CEO David Cush. “While we are disappointed that our operating results fell short of our expectations primarily due to fuel prices, we are encouraged that we were able to recover over half of the sharp fuel increase through revenue gains. Our strong sales performance and recent expansions to major business and leisure destinations such as Dallas-Fort Worth and Chicago forecast a strong overall picture for 2011 and beyond.”

Investment in growth and increased fuel prices accounted for the cost increases for the carrier year-over-year. The financial pressures of growth reduced first quarter operating results by $13 million, when accounting for the additional investment in capacity and the revenue ramp up associated with new routes. Operating expense per available seat mile excluding fuel (ex-fuel CASM) increased by 5% over the same quarter last year, as a result of cost of idle capacity, primarily new staff in training and new aircraft being modified to Virgin America standards.

The airline says it has seen significant year-over-year increases in traffic, bookings and average fares in the second quarter of 2011. The airline will release the results for this quarter later in the summer.

In response to the challenging fuel environment, Virgin America continued to hedge to help manage volatility. The airline hedged 50% of its 2011 projected fuel requirements, with 77% of its first quarter 2011 requirements hedged at an average crude oil call strike price of $82 per barrel.

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