Virgin America to stir it up in the Chicago market, taking on American and United

April 23, 2011

Virgin America Airbus A320-214 N630VA (msn 3101) LAX (Michael B. Ing), originally uploaded by Airliners Gallery.

Virgin America (San Francisco) is entering the Chicago market with a flourish on May 25 when it starts its brand of service to Los Angeles and San Francisco.

On April 20 the airline launched a social network assault on the established carriers in the market. The flashy airline issued the following statement:

“Virgin America, the new airline that is anything but ordinary, today (April 20) launches a social media-driven digital marketing campaign that invites flyers in its newest market to take the “Flight for Chicago Challenge.” In February, the award-winning airline launched sales to its newest market of Chicago O’Hare International Airport (ORD), with daily nonstop flights from both Los Angeles International Airport (LAX) and San Francisco International Airport (SFO) starting on May 25, 2011. With legacy airlines representing 98 percent of domestic departures at ORD, Virgin America is injecting some much-needed competition into the ORD-West Coast routes with its unique low-fare flights. The “Flight for Chicago” Facebook Challenge asks Chicagoans to help the new airline “put the smack-down on ordinary air travel” and fight for a good cause at the same time. Those who submit an approved Facebook photo or video by May 11, 2011, showing how they “rise above the ordinary” and are not “featherweight flyers” receive a two-for-one offer on Virgin America’s fresh new Chicago flights. The airline will donate $5 per entry to Stand Up To Cancer. The top five video submissions and top five photo submissions, as determined by voting and judging, will go on to become “contenders” to decide who will be the title holder of the Chicago skies, with the airline inviting them to fly on its competition to California and back to Chicago on one of Virgin America’s inaugural flights.

Known for its mood-lit, beautifully designed cabins, touch-screen entertainment and low-fare service, Virgin America has been shaking up the status quo in domestic flying since its 2007 launch – and winning over consumers and travel awards along the way. The top ten “Flight for Chicago” contenders will score a one-way flight from ORD to LAX or SFO on any competing domestic airline and a “victory lap home” on one of Virgin America’s May inaugural flights from California to Chicago. Contenders will also receive environmentally-responsible roundtrip ground transportation from Embarque, a three-night stay at the Clift San Francisco or Mondrian Los Angeles Hotel and a video-enabled no-contract Virgin Mobile USA LG Optimus V with a $40 Top-Up card to document their experience. Voting is open to everyone, and those who vote will also receive a 20 percent off discount promo code on Virgin America flights. The “Flight for Chicago” challenge is live from April 20, 2011 – May 11, 2011 on the airline’s Facebook page at: www.facebook.com/virginamerica.”

Also read the full story from the Chicago Tribune for the “Battle of Chicago”: CLICK HERE

On the financial side, the airline on April 21 reported its financial results for the fourth quarter of 2010 and full year 2010.

According to Virgin America, “Against the backdrop of higher fuel costs and the 2010 winter storms, the airline reported strong revenue performance with a 32 percent jump in revenue versus full year 2009. The airline reported revenues of $191 million for the fourth quarter of 2010 and $724 million for full year 2010 – a year-over-year revenue increase of 25 percent and 32 percent respectively (on a 17 percent year-over-year increase in capacity for the full year). For full year 2010, Virgin America reported a $12 million operating loss on revenues of $724 million — a 68 percent year-over-year improvement, and notable given that the airline’s fuel costs also increased by $73 million for the same period due to higher fuel costs per gallon. The airline reported a (1.7) percent operating margin for full year 2010. As the airline continued to deliver significant growth, it reported industry-leading unit revenue performance (RASM) with a 16 percent improvement in RASM year-over-year for full year 2010. The growing airline’s stage-length adjusted guest unit revenue was also up 12 percent for the quarter and 20 percent for the full year. In 2010, the company reported its first quarterly net profit in the third quarter. Despite its revenue performance and its first quarterly net profit, the airline’s full year 2010 results were lower than originally forecast primarily due to increased fuel costs, higher costs of growth and the impact of the East Coast storms.”

The airline reported an operating loss of $11 million in the fourth quarter.

The airline grew its fleet from 28 aircraft to 34 aircraft during 2010. The airline’s yield per passenger mile for full year 2010 was 11 cents, up 16 percent compared to full year 2009. Virgin America continues to hedge in order to help manage fuel price volatility. The airline hedged 50 percent of its 2011 projected fuel requirements, with 77 percent of its first quarter 2011 requirements hedged at an average crude oil call strike price of $82 per barrel.

Virgin America ended 2010 with $30 million in unrestricted cash and $66 million in total liquidity. Does it have the financial staying power to take on the big legacy carriers? It bravely believes it does due to its superior product.

Copyright Photo: Michael B. Ing. Please click on the photo for additional information.