Virgin America announces 2Q10 financial results

Virgin America has reported its financial results for the second quarter of 2010 including a record-setting performance for the quarter with revenues of $184 million – a 36% jump in revenue versus the second quarter of 2009 – plus unit revenue (RASM) increasing by 23% year-over-year.

As the airline continued to expand significantly, it broke even on an operating basis for the quarter – an improvement of 92% year-over-year. Yield per passenger mile in the second quarter was 11 cents, up 28% compared to the second quarter of 2009. Adjusting for the non-cash unrealised losses on its fuel derivatives, the airline would have reported operating income of $10 million and a 5.6% operating margin for the quarter.

Virgin America continued to hedge to help manage fuel price volatility. The airline has hedged 85% of its second half of 2010 projected fuel requirements at an average crude oil call strike price of $82 per barrel.

"Even with significant increases in fuel costs during the quarter, our top line progress continues to exceed our expectations as a young and growing airline. Despite the rough economic climate since our launch, we remain on track with our original projection of achieving a full year operating profit in 2010," stated Virgin America president and CEO David Cush. "With revenue up by over one-third year-over-year, an unrivalled product and an award-winning team, we’re pleased with our company’s trajectory in what is just our third year of operations."

In areas of cost control, Virgin America’s operating expense per available seat mile excluding fuel (ex-fuel CASM) dropped by 6%, as the airline continued to increase capacity at a low marginal cost. The airline ended the second quarter of 2010 with $26 million in unrestricted cash and $100 million in total liquidity.

Although Virgin America does not yet meet the size threshold to be classified a ‘major’ carrier by US DoT, the airline tracks its on-time performance, baggage handling and other key operational statistics in advance of DoT’s requirement to report. For the second quarter of 2010, Virgin America achieved an 86% cumulative A-14 on-time ranking, which would have placed the carrier third among all US reporting carriers for on-time performance during the quarter.

The airline also reported that it “outperformed the majority of the industry” with a 99.9% completion factor, which would have placed the carrier second among all US carriers when compared to DoT’s reportable data. The airline’s baggage handling rate for the second quarter was 0.82 mishandled baggage reports per 1000 guests (versus the industry average of 3.31), which would have placed it first among all US carriers for baggage reliability, when compared to DoT’s reportable data.

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