Virgin America’s Chief Executive, David Cush, had a lot to say over the weekend as the airline showed off its first aircraft equipped with wireless internet access, but the most interesting thing he said had nothing to do with the web. Cush had plenty to say on the airline’s finances, though I found some of his comments to sharply contradict other more optimistic statements that have been made recently by a director with the airline.
The news that caught my attention was when Cush said, according to a Reuters interview, “Our view way back was 2010 would be a break-even year or a profit year. And I still think we have a shot at that. But given what’s going on with the economy, it could push it back to 2011.” Now contrast that with an article in the Financial Times just last month in which one of Virgin America’s directors, Robert Nisi, was cited as saying that the airline was seeing load factors above 80% and would hit profitability by the second half of next year.
So let me get this straight. Back in early October, when fuel was still hovering around $90 a barrel but the economy was heading downhill already, one of the airline’s directors said that they could see profitability by the back half of 2009. Now that oil is way down to around $50 a barrel, you can’t tell me the economy has tanked so much more that profitability may be pushed beyond 2010 all the way to 2011. Something doesn’t sound right here.
Unfortunately, we can’t see Virgin America’s quarterly financial statements, because they continue to refuse to release them as required. (We’re all waiting for a ruling on this now.) I understand that we’re looking at different markets and time periods, but just for fun, let’s compare this to JetBlue’s run to profitability. JetBlue began flying in February 2000 and had its first full year profit in 2001. (By the way, even at double today’s fuel prices, JetBlue still would have turned a profit in 2001.) So Virgin America is behind JetBlue on the curve right now, but yes, I understand this is a really rough comparison at best.
Another interesting thing that was mentioned in the article was that Virgin America doesn’t expect to grow its fleet for 1 1/2 or 2 years. For an airline that just started, that is certainly surprising. I imagine this means that they won’t hesitate to move planes into different markets, but we just won’t see any more planes. That means that they won’t be able to spread their fixed costs over a growing fleet, and they won’t have an influx of low cost new hires coming into the system. That will also make profitability tougher.
