May 04, 2012 at 13:00 PM EDT
Virgin America Reports Fourth Quarter and Full Year 2011 Financial Results
Airline Reports 43 Percent Increase in Operating Revenues While Fueling Record Growth in Fourth Year of Operations

SAN FRANCISCO, May 4, 2012 /PRNewswire/ -- Virgin America today reported its financial results for the fourth quarter of 2011 and full year 2011.  Despite substantially higher fuel costs and financial pressures associated with industry-leading capacity growth, the airline narrowed its fourth quarter operating loss to $8.1 million (a 29 percent year-over-year improvement) and its fourth quarter margin to (2.9 percent) – an improvement of three points year-over-year.  The airline's full year operating loss was $27.4 million on revenues of over $1 billion.  Top line growth remained strong with revenue gains significantly outpacing capacity growth.  Year-over-year, revenue grew by 45 percent for the fourth quarter and 43 percent for the full year on a 29 percent increase in capacity – compared to an industry average capacity growth rate of less than one percent in 2011.  The airline ended 2011 with $160 million in unrestricted cash.

Virgin America's results were primarily impacted by high fuel costs and the costs of growth.  The airline also incurred costs associated with its transition to a new reservations system in 2011.  The cost per gallon of fuel increased by 38 percent in the fourth quarter and 33 percent for the full year versus the prices paid in the prior year.  This fuel cost increase reduced the airline's operating profit by $31 million for the quarter and $105 million for the full year.  The airline's rate of growth and entry into new markets created margin pressure which offset gains in more mature markets.  The carrier's established markets (those operated for at least 12 months prior to the fourth quarter of 2010) were profitable for both the fourth quarter and full year 2011.  In these markets, revenue per available seat mile (RASM) improved by 18 percent year-over-year for the fourth quarter.

"As a young airline fueling growth unique in this era, we remain satisfied with the progress toward our financial goals.  While volatile and increasing fuel prices represent a challenge for all carriers, it is a greater one for an airline growing rapidly and establishing itself in new markets," said Virgin America President and CEO David Cush.  "For the last four years, our passenger unit revenue performance gains have surpassed industry performance even as we have added large amounts of capacity while most of the industry has not grown.  Our core markets are profitable and we expect the new 2011 capacity to turn profitable in 2012.  We continued to build a strong foundation in 2011, with a major fleet order, additional financing that reflects investor confidence in our long-term business model and a move to an industry-standard reservations system that allows us to grow."

In late 2011, Virgin America reported that it raised an additional $150 million through a four and a half year debt facility.  The airline also noted that it obtained lease financing commitments for all of its Airbus A320 Family aircraft slated for delivery through September 2013.  In addition, the airline closed on a financing facility for the majority of its pre-delivery payment obligations ("PDPs") due on the first 20 aircraft within its order of 60 Airbus A320s, scheduled to begin delivery in summer 2013.  In 2011, the carrier announced a major fleet order, which included the first commercial order for the new Airbus A320neo.

Virgin America continued to drive significant growth in 2011:  expanding its fleet from 34 aircraft in January 2011 to 46 aircraft in December 2011 (as of May 1, 2012, the carrier operates 51 aircraft); achieving major carrier status as defined by the Dept. of Transportation (DOT); launching service to Cancun, Puerto Vallarta, Chicago and Palm Springs; and expanding  into its new home at San Francisco International Airport's (SFO) Terminal 2.  Since its 2007 launch, the airline has created 2,600 new jobs, expanded to 17 cities, signed up two million Elevate® members and swept the reader-based travel awards including "Best Domestic Airline" in Conde Nast Traveler's Readers' Choice Awards and Travel + Leisure's World's Best Awards.  As one of the few growing U.S. airlines, Virgin America grew by 342 teammates in 2011 and plans to add 200-500 new jobs annually over the next several years.

"Despite our rapid growth and the hurdles we've faced since launch, our service has continued to sweep the travel awards every year – a testament to our unique product and the hard work of all of our teammates," added Cush. 

Fuel prices remained a challenge for Virgin America and the overall U.S. industry in 2011.  Had fuel prices remained flat year-over-year, the airline's fuel costs would have been reduced by $105 million.  Average fuel costs per ASM increased year-over-year from 3.22 cents in 2011 to 4.24 cents – an increase of 32 percent.   In late 2011, Virgin America resumed a structured fuel hedging program to help manage the impact of fuel price volatility.  Approximately 70 percent of the airline's fuel consumption in the first quarter of 2012 was hedged at prices slightly below market levels.  The carrier has hedged approximately 37 percent of its expected fuel consumption for the remainder of 2012 at levels close to current fuel market prices, providing some protection should jet fuel prices increase further.

In 2011, Virgin America completed a major reservations system migration, assuring that it has industry best systems in Sales /Reservations, Airport Operations and Flight Operations.  System migrations of this scale are typically a once-in-a-lifetime event for an airline, involving the migration of millions of records during live operations.  In addition to the airline's $4 million capitalized investment in the Sabre systems, Virgin America incurred $3.9 million in expenses related to the transition.  In addition to these direct costs, the airline waived approximately $1 million in ancillary revenue fees in the fourth quarter.  During part of the transition, the airline waived  change /cancel fees for flyers experiencing issues as a result of the migration and credited flying loyalty program members with 5000 Elevate points by way of further apology for any inconvenience experienced.  Going forward, the new Sabre system allows the airline to accommodate its growth, expand code-share/interline capability and enhance its Elevate loyalty program.  Since the transition, the airline has linked its frequent flyer program with the other Virgin carriers and signed several new interline partners

Top Line Fourth Quarter Reporting Highlights:

  • Operating results:  The airline reported an operating loss of $8 million in the fourth quarter – a 29 percent improvement year-over-year.
  • Load factors:  Revenue passenger miles increased 28 percent on a 29 percent increase in capacity, resulting in a fourth quarter load factor of 82 percent – a one-point drop year-over-year.
  • Top line progress:  Revenue in the fourth quarter was up 45 percent versus fourth quarter 2010.  RASM increased by 12 percent year-over-year.
  • Cost control:  Operating expense per available seat mile excluding fuel (ex-fuel CASM) decreased by 3.4 percent in the quarter, even in the midst of investments to fuel growth (training, people, aircraft in modification and reservation system changeover).

Top line Full Year 2011 Reporting Highlights:

  • Operating results:  The airline reported an operating loss of $27 million, resulting in a (2.6) percent operating margin for 2011.
  • Load factors:  Revenue passenger miles increased 29 percent on a 29 percent increase in capacity, resulting in a 2011 load factor of 82 percent (no change from 2010).
  • Top line progress:  Revenue in 2011 was up 43 percent versus 2010.  RASM increased by 11 percent year-over-year.
  • Cost control:  Operating expense per available seat mile excluding fuel (ex-fuel CASM) increased 2.5 percent in 2011, with significant investments in growth (training, systems, people and aircraft in modification).
  • Cash:  The airline ended 2011 with $160 million in unrestricted cash, a high point for liquidity in Virgin America's history.

Based on its 2011 growth, Virgin America now meets the size threshold to be classified a "major" carrier by the DOT.  The carrier now reports monthly on-time performance, baggage handling and other operational statistics to the DOT.  Even prior to reaching the DOT threshold, the airline voluntarily reported its on-time performance, baggage handling and other key operational statistics.  For January-December 2011, the airline achieved an 83.8 percent cumulative A-14 on-time ranking, higher than the industry average of 79.6 percent.  The airline's baggage handling rate for 2011 was .88 mishandled baggage reports per 1000 guests, which would have placed it first among all U.S. carriers for baggage reliability, when compared to DOT's data for reporting carriers in the same period.  With nearly 92 percent of its flights on time in February 2012, Virgin America ranked first among the 15 carriers included in the DOT rankings for the month.  The carrier also ranked number one in the baggage handling category, with a mishandled baggage rate of 0.7 reports per 1,000 enplaned guests in February. 

Other key milestones achieved in 2011 include:

Virgin America flies to San Francisco, Los Angeles, New York, Washington D.C., Seattle, Las Vegas, San Diego, Boston, Fort Lauderdale, Orlando, Dallas-Fort Worth, Los Cabos, Cancun, Chicago, Puerto Vallarta, Palm Springs, Philadelphia and as of June 5, 2012Portland.

Although a privately held company, Virgin America is announcing these earnings results in advance of the DOT quarterly reports.

Virgin America, Inc.

Consolidated Statement of Operations

For the Twelve Months Ending December 31, 2011


(in thousands, except percentages)















Three months ended December 31


Variance


Year ended

December 31


Variance



2011


2010


%


2011


2010


%




























OPERATING REVENUES













   Guest

$  253,764


$  172,061


47.5%


$   950,933


$  655,448


45.1%


   Other

23,034


18,636


23.6%


86,175


68,598


25.6%


Total operating revenues

276,798


190,697


45.2%


1,037,108


724,046


43.2%















OPERATING EXPENSES


























   Aircraft fuel

111,028


62,830


76.7%


417,815


246,699


69.4%


   Aircraft rents

46,905


35,733


31.3%


169,537


121,680


39.3%


   Wages, salaries and related costs

36,715


28,536


28.7%


138,276


108,901


27.0%


   Aircraft maintenance

11,999


12,745


(5.9%)


52,935


39,759


33.1%


   Landing fees and other rents

23,680


18,836


25.7%


87,133


69,036


26.2%


   Sales and marketing

20,340


17,278


17.7%


81,901


59,990


36.5%


   Guest services and supplies

10,644


9,049


17.6%


41,664


32,881


26.7%


   Depreciation

3,412


2,357


44.8%


10,155


10,530


(3.6%)


   Other operating expenses

20,206


14,749


37.0%


65,088


47,007


38.5%


Total operating expenses

284,929


202,113


41.0%


1,064,504


736,483


44.5%















Operating income (loss)

(8,131)


(11,416)


28.8%


(27,396)


(12,437)


(120.3%)















Operating margin

(2.9%)


(6.0%)


3.0

pts

(2.6%)


(1.7%)


(0.9)

pts














Other (income) expense

22,696


13,677


65.9%


73,007


56,238


29.8%















Net income (loss)

$  (30,827)


$  (25,093)


(22.9%)


$ (100,403)


$  (68,675)


(46.2%)















EBITDA

$     (4,719)


$     (9,059)


47.9%


$   (17,241)


$     (1,907)


(804.1%)


EBITDAR

$     42,186


$     26,674


58.2%


$   152,296


$   119,773


27.2%















Adjusted for unrealized (gains) losses on fuel derivatives:













   EBITDAR

$     42,699


$     19,301


121.2%


$   159,978


$  123,683


29.3%


   Operating income (loss)

$     (7,618)


$    (18,789)


59.5%


$   (19,714)


$    (8,527)


(131.2%)


   Operating margin

(2.8%)


(9.9%)


7.2

pts

(1.9%)


(1.2%)


(0.7)

pts

Virgin America Inc.

Comparative Operating Statistics




















Three months ended 





Year ended 







December 31


Percent



December 31


Percent





2011


2010


Change



2011


2010


Change


















Available seat miles (ASMs)(millions)



2,656


2,052


29.4



9,855


7,654


28.8


Scheduled ASMs (millions)



2,656


2,051


29.5



9,854


7,652


28.8


Average stage length (miles)



1,567


1,582


(0.9)



1,571


1,546


1.6


Aircraft in service (average)



42


32


31.3



39


29


34.5


Fleet utilization (blk hours per ac day)



12.2


12.5


(2.4)



12.6


12.8


(1.6)


















Guests



1,373,528


1,067,567


28.7



5,030,143


3,909,165


28.7


Scheduled revenue passenger miles (millions)



2,188


1,710


28.0



8,034


6,236


28.8


Load factor



82.4%


83.3%


(0.9)

pts


81.5%


81.5%


-

pts

Average fare 



$184.75


$161.17


14.6



$189.05


$167.67


12.8


Total revenue per available seat mile - RASM (cents)



10.42


9.29


12.2



10.52


9.46


11.2


Guest revenue per available seat mile (cents)



9.56


8.39


13.9



9.65


8.57


12.6


Yield per passenger mile (cents)



11.60


10.06


15.3



11.84


10.51


12.7


















Cost per available seat mile - CASM (cents)



$10.73


9.85


8.9



10.80


9.62


12.3


Cost per ASM, excluding fuel (cents)



6.55


6.78


(3.4)



6.56


6.40


2.5


Fuel cost per gallon



$3.21


$2.32


38.4



$3.24


$2.43


33.3


Fuel gallons consumed (thousands)



34,618


27,094


27.8



129,058


101,482


27.2


Teammates (FTEs)



2,112


1,770


19.3









About Virgin America: Headquartered in California, Virgin America offers guests attractive fares and a host of innovative features aimed at reinventing air travel. In just over four years flying, Virgin America was named "Best Domestic Airline" in the Conde Nast Traveler 2008, 2009, 2010 and 2011 'Readers' Choice' Awards and "Best Domestic Airline" in Travel + Leisure's 2008, 2009, 2010 and 2011 'World's Best' Awards. The airline's base of operations is San Francisco International Airport (SFO)'s sleek and sustainable new Terminal 2. The airline's new aircraft offer interactive in-flight entertainment systems and power outlets near every seat. Virgin America offers Gogo™ WiFi on every flight and hosts the largest in-flight entertainment library in the North American skies via the touch-screen Red™ platform. For more: www.virginamerica.com

SOURCE Virgin America

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