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Virgin America, the only major airline based in California, was envisioned as a low-cost airline with high-tech amenities. (Michael Robinson Chavez, Los Angeles Times / January 11, 2012) |
Even by the standards of today's economy, Virgin America's financial health seems pretty weak: While enjoying a hip, high-tech reputation, the San Francisco airline has reported only one profitable three-month period since it launched nearly five years ago.
If the airline's executives are worried, they aren't showing it. In fact, they continue to hire at a brisk pace — 500 workers last year — and, at a time when other airlines are cutting back, they have added routes on a regular basis. They say they are laying the groundwork for a money-making airline.
"We are happy with the trajectory it's going," said billionaire Richard Branson, founder of the Virgin Group, a minority share owner in the privately held airline. "If we wanted to make profits, we would stop expanding."
Then again, the nation's only major California-based airline has never followed a traditional path.
Only a few months after launching in 2007, the airline held a Victoria Secret fashion show onboard a flight from Los Angeles to New York. Since 2010, the airline has teamed up with animal shelters in San Francisco to fly about 200 homeless Chihuahuas to New York to get them adopted by apartment dwellers in the Big Apple.
Virgin America is also the first U.S. airline to install power outlets near every seat and equips every cabin with soft lighting that changes from pink to blue to purple, based on the time of day.
It's a cool and hip style that has won over many young devoted passengers and helped beat out bigger and more established airlines for top awards from Conde Nast Traveler and Travel & Leisure magazines over the last four years. The airline's loyal customers, however, were quick to jump on Facebook to complain last fall when its reservation system went haywire.
But analysts wonder when such accolades will produce steady profits.
"It's kinda time for them to start making money," said Seth Kaplan, a managing partner at Airline Weekly, a trade publication.
Then again, other industry experts say, the upstart airline could be a gamble that is about to pay off big.
"With the established airlines cutting capacity, they might be filling a void," said Betsy Snyder, an airline analyst with Standard & Poors. "People who have flown them say they have a great product."
From the beginning, the airline faced strong head winds.
Virgin America, launched in August 2007, was envisioned as a low-cost airline with high-tech amenities, such as a touch-screen entertainment system, wireless Internet and cabins with soft mood lighting. Branson's Virgin Group holds 25% of the airline's voting stock, with VAI Partners, a consortium of U.S. investors, holding 75%.
Virgin America's main hub is San Francisco International Airport, but the airline is not limiting itself to the West Coast.
Today, the airline has 2,200 employees and serves 16 airports in the U.S. and Mexico, adding the newest destination, Palm Springs in December. Although the airline fits the technical definition of a low-cost airline, its fares are often beat by its bigger competitors.
"Our reason for starting Virgin America was the lack of quality in the country's airlines," Branson said.
But Virgin America's business plan put it in direct competition with low-cost carriers like Southwest Airlines and JetBlue, as well as major network carriers. Nearly 80% of Virgin America's routes now overlap those of major airlines like United Air Lines and American Airlines.
"I don't see them growing to overtake Southwest," said George Hobica, founder of the travel website Airfarewatchdog, "but they're definitely causing angina for JetBlue in some markets."
New York-based JetBlue shrugs off such talk.
If the airline's executives are worried, they aren't showing it. In fact, they continue to hire at a brisk pace — 500 workers last year — and, at a time when other airlines are cutting back, they have added routes on a regular basis. They say they are laying the groundwork for a money-making airline.
"We are happy with the trajectory it's going," said billionaire Richard Branson, founder of the Virgin Group, a minority share owner in the privately held airline. "If we wanted to make profits, we would stop expanding."
Then again, the nation's only major California-based airline has never followed a traditional path.
Only a few months after launching in 2007, the airline held a Victoria Secret fashion show onboard a flight from Los Angeles to New York. Since 2010, the airline has teamed up with animal shelters in San Francisco to fly about 200 homeless Chihuahuas to New York to get them adopted by apartment dwellers in the Big Apple.
Virgin America is also the first U.S. airline to install power outlets near every seat and equips every cabin with soft lighting that changes from pink to blue to purple, based on the time of day.
It's a cool and hip style that has won over many young devoted passengers and helped beat out bigger and more established airlines for top awards from Conde Nast Traveler and Travel & Leisure magazines over the last four years. The airline's loyal customers, however, were quick to jump on Facebook to complain last fall when its reservation system went haywire.
But analysts wonder when such accolades will produce steady profits.
"It's kinda time for them to start making money," said Seth Kaplan, a managing partner at Airline Weekly, a trade publication.
Then again, other industry experts say, the upstart airline could be a gamble that is about to pay off big.
"With the established airlines cutting capacity, they might be filling a void," said Betsy Snyder, an airline analyst with Standard & Poors. "People who have flown them say they have a great product."
From the beginning, the airline faced strong head winds.
Virgin America, launched in August 2007, was envisioned as a low-cost airline with high-tech amenities, such as a touch-screen entertainment system, wireless Internet and cabins with soft mood lighting. Branson's Virgin Group holds 25% of the airline's voting stock, with VAI Partners, a consortium of U.S. investors, holding 75%.
Virgin America's main hub is San Francisco International Airport, but the airline is not limiting itself to the West Coast.
Today, the airline has 2,200 employees and serves 16 airports in the U.S. and Mexico, adding the newest destination, Palm Springs in December. Although the airline fits the technical definition of a low-cost airline, its fares are often beat by its bigger competitors.
"Our reason for starting Virgin America was the lack of quality in the country's airlines," Branson said.
But Virgin America's business plan put it in direct competition with low-cost carriers like Southwest Airlines and JetBlue, as well as major network carriers. Nearly 80% of Virgin America's routes now overlap those of major airlines like United Air Lines and American Airlines.
"I don't see them growing to overtake Southwest," said George Hobica, founder of the travel website Airfarewatchdog, "but they're definitely causing angina for JetBlue in some markets."
New York-based JetBlue shrugs off such talk.
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