Income up, but still $27m loss for Virgin America

[Pete]

Virgin America have just announced their Q4 figures for 2008

It's good to see their income is growing, and their costs aren't rising as fast as that income as a percent, but if they're already stating an 81% load factor, I do wonder where the extra growth will come from to extrapolate that cost-to-turnover line to the point they can make a profit.

Looking at their numbers, in Q4 last year they achieved approx 62% load and brought in $36m, which would imply the total potential business, if they sold every seat was $58m, versus their costs of $96m.

This year they did approx $110m worth of business, which equates to $135m if they sold every seat. Their costs were $137m - which is a big improvement on last year, but they will need to reduce costs or increase potential business (increasing the load factor alone wouldn't be enough, and from 81% would seem a very talk order anyway). If they have $68m reserves of cash, then it looks like they have 2 - maybe 3 - quarters to achieve this or they'll run out of money.

Although the business was up a whopping 87% year-on-year, the Q3 to Q4 business only grew by 5%, so they have a tough challenge (in a tough market) to make it work.

Fingers crossed they can.

[Darren Wheeler]

Hope so too. I'm looking forward to my first taste of VX in May. I would imagine that their biggest cost (fuel) is somewhat under control now, but it's bums-on-seats that they need.

Glad to see improvement - one would assume some of that cost is fixed overhead so as routes grow things might look a bit better. I don't recall when routes came on stream last year but if they were earlier you'd expect the growth curve to flatten a but until the next ones are active like when Boston kicks in this current Q1 09.

Lots of x-fingers VX can see through the recession and keep carving out its niche to survive and grow further.

[Scrooge]

They have been taking a total bath on the Seattle routes, if they can get the yield up on those they would go a long way towards making money.

This LINK gives you teh margins for the 3Qt, they are not pretty.

[preiffer]

Aren't a lot of the first few years' costs depreciation on certain items?

Although they're leasing the planes, there WILL be capital startup costs. Once depreciated, these will not be a factor in operating profit.

[Pete]

quote:Originally posted by preiffer
Aren't a lot of the first few years' costs depreciation on certain items?

Although they're leasing the planes, there WILL be capital startup costs. Once depreciated, these will not be a factor in operating profit.


That's a good point; although you'd have thought they would have mentioned something if there was a big upside like that coming.

[Scrooge]

Yes there will be start up costs, but most of those would of been taken into account in the 1st qt, the only other start up costs would be for the new routes opening.

The majority of the losses comes from the fact that as Pete points out, on most routes you need more than a 100% LF to get some profit, until those yields improve VX won't see a profit.

quote:Originally posted by Scrooge
Yes there will be start up costs, but most of those would of been taken into account in the 1st qt, the only other start up costs would be for the new routes opening.



Yes, losses are a mixture of start up costs and opex, but think that capital asset depreciation runs for many more years than one quarter. Sorry Mr Scrooge. The actual amortization of these could run for three / four years for office fitting out, up to ten years for property and some other assets and perhaps as much as twenty years for planes. So this could represent a large fixed cost per annum in the accounts which means, as I originally posted, that the gap between profitability and loss is less than we might suppose. We really need to see the statement of accounts and assets to know more.

quote:Originally posted by Pete
That's a good point; although you'd have thought they would have mentioned something if there was a big upside like that coming.


Pete, there are conventions on reporting of this, snd there'll be detail in the asset sheet which we don't yet see and also plenty of reasons why not to expose within what is permitted for reporting.

quote:Originally posted by PReiffer
Aren't a lot of the first few years' costs depreciation on certain items?


So Mr 'Bum' preiffer has a good point [^]

[Scrooge]

You know, I wasn't even thinking about office fittings [:I]

If I am remembering correctly they out source the ramp work.

Are the planes leased ?

Damn I really am going to have to take a longer look at 10Q

quote:Originally posted by Scrooge
You know, I wasn't even thinking about office fittings [:I]

If I am remembering correctly they out source the ramp work.

Are the planes leased ?

Damn I really am going to have to take a longer look at 10Q




LOL offices blah! Added to the capex, there are still fixed central operating costs like ticketing services which can scale more cheaply than other parts ...

[Scrooge]

Oh for sure, however as the company expands the fixed costs should only go up a small amount, at least in theory, of course the one thing we have not considered is how much did the price of JetA dropping have on the results.

Well in the original press release it states that 15 of the 33 aircraft will be leased from GECAS.

Planespotters.net say that aircraft are leased from GECAS, Wells Fargo Bank and a couple of trust funds (including 2 that seem to have been set up specifically to finance the aircraft hence the name is NxxxVA Trust)

From the information I have found it seems that most of the 319's are owned by VX.

How many aircraft do they currently have in service?

[Scrooge]

Right now there are 28 aircraft, so 13 are owned.

quote:Originally posted by Scrooge
Right now there are 28 aircraft, so 13 are owned.


Yep that is correct. Although I think there are actually only 26 aircraft as two aircraft were leased from TAM for a period prior to deliveries (N629VA and N623VA) and have now been returned. There seems to be a bit of confusion over N521VA but I believe it is now back with VX.

I think VX have the legs to remain.