Posted on: 29 October 2015 by Ross McSweeny
Virgin America has announced its financial results for the third quarter of 2015 (3Q15), reporting a net income of $73.0 million excluding special items, an increase of $31.3 million from the third quarter of 2014 (3Q14) based on an operating income and an operating margin – excluding special items – of $75.0 million and 18.2%, respectively.
On a GAAP basis, the net income was $71.9 million, while operating income and operating margin on a GAAP basis were $73.9 million and 18.0%, respectively.
"Virgin America continued its strong financial performance in the third quarter with record earnings and margins," declared David Cush, Virgin America's president and chief executive officer. "We believe we are well-positioned to grow the airline while maintaining our low cost model, driving year-over-year industry unit revenue outperformance and improving ancillary revenue. We're also investing in our product so that we can continue improving what is already the best, most consistent guest experience in the industry."
The airline’s total operating revenue was $410.9 million, an increase of 1.3% over 3Q14’s result. The passenger revenue per available seat mile (PRASM) decreased 2.7% compared with 3Q14, to 11.05 cents. Year-over-year PRASM decline was driven by a 1.0 percentage point (pp) decrease in load factor and a 1.8% decrease in yield. Total revenue per available seat mile (RASM) decreased by 1.6% year-over-year.
On costs, the total cost per available seat mile (CASM) excluding special items decreased 7.7% compared with the 3Q14, to 10.13 cents. Decreases in fuel costs contributed to the decline in CASM, partially offset by increases in salaries, wages and benefits, landing fees and other rent and aircraft maintenance. Salaries, wages and benefits costs included a $7.1 million accrual for staff profit sharing and related payroll taxes. CASM excluding special items, fuel costs and profit sharing for the quarter increased 11.0% year-over-year, to 7.34 cents.
Special items in 3Q15 relate to $1.1 million net mark-to-market adjustments for fuel hedges that did not qualify for hedge accounting treatment and which mature subsequent to 30 September 2015, offset by the effect of fuel hedges that settled during the quarter for which prior unrealised mark-to-market adjustments are now realised.
In October, Virgin America entered into agreements to finance approximately 80% of the purchase price of its five 2016 Airbus A320 aircraft deliveries. The weighted average interest rate on these financing commitments, if fixed at current underlying interest rates, would be under 5.0%.