Virgin America Reports Third Quarter 2012 Financial Results Airline Reports $15.8 Million Operating Profit in the Third Quarter and Forecasts Operating Profit in the Fourth Quarter Airline Announces Deferred Growth Plans PR Newswire SAN FRANCISCO, Nov. 16, 2012 SAN FRANCISCO, Nov. 16, 2012 /PRNewswire/ --Virgin America today reports its financial results for the third quarter of 2012. The airline achieved a $15.8 million operating profit for the quarter, resulting in a four percent operating margin. Despite the continued dual financial pressure of high fuel prices and Virgin America's industry-leading capacity growth, the airline reported an operating profit for the quarter, improved unit costs, and an increase in average fares. For the third quarter, the carrier reported a 24 percent improvement year-over-year in earnings before interest, taxes, depreciation and amortization, and aircraft rental expense (EBITDAR). Year-to-date, the airline reported a record high EBITDAR of $135.7 million, an improvement of 23 percent year-over-year. Cost per available seat mile excluding fuel (ex-fuel CASM) decreased year-over-year by three percent in the three months ended September 30, 2012. A privately-held company, the carrier is additionally forecasting an operating profit for the fourth quarter of 2012. (Logo: http://photos.prnewswire.com/prnh/20090123/VIRGINAMERICALOGO) From the third quarter of 2010 through the third quarter of 2012, the airline increased available seat miles (ASMs) by 73 percent, significantly outpacing the industry ASM growth average of 0.4 percent. Virgin America's rate of growth was necessary to establish the airline's core network and to achieve economies of scale. However, as the airline absorbed the tail-end of this growth cycle, its entry into new markets created margin pressure which offset gains in more mature markets. The airline's core markets (those operated more than 24 months) achieved an operating margin of eight percent in the third quarter and were profitable year-to-date. This strong performance in mature markets was offset by weaker performance in newer destinations added during the airline's rapid two-year growth phase. This phase of accelerated growth is now largely complete, as the airline plans to take delivery of just one additional aircraft in 2013—and today announces a deferred growth plan with respect to aircraft on order. This reduction in growth will allow the carrier to continue to improve profitability, as new markets develop to match the performance of its core established network. "Our major challenge has been managing significant growth into new markets during both a recession and an environment of historic oil price highs," said David Cush, President and CEO of Virgin America. "All airlines have faced these same industry challenges, but none have done so as a brand new carrier fueling 73 percent capacity growth in the past 24 months. We've consistently seen that markets we operate in longer than 12 to 18 months mature into profitability, demonstrating that once people fly with us, they stay with us – especially higher-yielding business travelers." Virgin America announces today that it has reached an agreement to modify its Airbus aircraft order. Under the revised agreement, Virgin America's order for current engine option A320 aircraft will be reduced from 30 positions to ten, with delivery of those aircraft occurring in 2015 and 2016. In addition, the airline announces it will defer its 30 Airbus A320neo positions to new delivery dates in 2020 through 2022. Average ASM growth will decelerate from the 28 percent annual growth rate the airline has driven over the past three years, to mid single-digit annual ASM growth over the next several years. The Company has taken delivery of 24 aircraft since the first quarter of 2010 – growing to a fleet of 52 Airbus A320 Family aircraft. "The low operating costs, cabin comfort and fuel efficient design of our Airbus A320 Family fleet has provided an excellent platform for our growth to date and we remain confident that it is the right aircraft for our future plans. With restructured growth, an unrivaled product and growing loyalty among business travelers, we're in a position to deliver strong performance in 2013 and beyond,"added Cush. "With slowed growth, we will be able to focus on maximizing the value of our network, instead of managing additional capacity. As we enter this period of measured growth, we expect the investment in our network to continue to provide improved financial results." In the 12 months ending in September 2012, Virgin America launched new service to Puerto Vallarta, Palm Springs, Philadelphia, Portland and Washington DC's Reagan National Airport. Since its 2007 launch, the airline has created 2,600 new jobs, expanded to 19 airport destinations, signed up 2.6 million Elevate® members and swept the reader-based travel awards, including "Best Domestic Airline" in Condé Nast Traveler's Readers' Choice Awards and Travel + Leisure's World's Best Awards. As one of the few expanding U.S. airlines, Virgin America grew by 495 teammates since the third quarter of 2011. Top Line Third Quarter Reporting Highlights: oOperating results: The airline reported an operating profit of $15.8 million in the third quarter. oAverage Fare: Average fare increased 3 percent year-over year. oLoad Factor: Revenue passenger miles increased 24 percent year-over-year on a 31 percent increase in capacity, resulting in a third quarter load factor of 80 percent– a five point load factor decrease for the quarter year-over-year. oTop line progress: Operating revenue for the third quarter grew by 27 percent year-over-year to $368 million on a 31 percent increase in Available Seat Miles (ASMs), at a time when most of the industry reported flat capacity. oCost control: Operating expense per available seat mile excluding fuel (ex-fuel CASM) decreased by 3 percent in the quarter year-over-year, reflecting the economies of scale from the Company's growth over the past year. oCash: The airline ended the quarter with $75 million in unrestricted cash. This year, Virgin America reached the threshold to be included in operational reports published by the U.S. Department of Transportation (DOT) and as such began reporting its on-time performance, baggage handling and other key operational statistics to the DOT monthly. For the third quarter of 2012, Virgin America achieved an 83.3 percent cumulative on-time performance, placing the carrier fifth for on-time performance among all reporting major U.S. carriers for the quarter. The airline's baggage handling rate for the first nine months of 2012 was 0.76 mishandled baggage reports per 1000 guests, which placed it first among all reporting U.S. carriers for baggage reliability. Key milestones achieved in the third quarter of 2012 include: oIn July, Virgin America took thetop honors for the fifth consecutive year as "Best Domestic Airline" in the prestigiousTravel + LeisureWorld's Best Awards readers' survey. oIn July, the airlinedebutednew uniforms for the airline's 2,000 in-flight, airport and pilot teammates. oIn July, the airline announceda suite of enhancements to its Elevate® frequent flyer program including new Elevate Gold and Elevate Silver status levels within the program, with perks that include: priority check-in, security clearance and boarding; points earning bonuses; free checked bag allowances; enhanced digital/social rewards; private discounts; an expanded advance purchase upgrade window for the airline's exclusive eight-seat First Class; complimentary space-available upgrades to the carrier's premium Main Cabin Select service; and complimentary access to the best seat assignments within Main Cabin. oIn August, the airline marked its fifth anniversary of operations with a week of festivities celebrating the airline's continued job growth, network expansion and award-winning service. oIn August, the airline inaugurated new daily nonstop service to Washington DC's Reagan National Airport from its SFO home. oIn September, the airline launched an integrated multi-media campaign that brought the airline's next generation cabins to life through the eyes of its frequent flyers. oIn September, the airline announced it would bring back its popular seasonal service from SFO to Palm Springs International Airport (PSP) and add a new weekly Saturday nonstop flight from New York's JFK International Airport to PSP – the only nonstop flight offered from the New York City area to Palm Springs. Virgin America flies to San Francisco, Los Angeles, New York, Washington D.C. (IAD and DCA), Seattle, Las Vegas, San Diego, Boston, Fort Lauderdale, Orlando, Dallas-Fort Worth, Los Cabos, Cancun, Chicago, Puerto Vallarta, Palm Springs (seasonally), Philadelphia and Portland. Although a privately held company, Virgin America is announcing these earnings results in advance of the DOT quarterly reports. Virgin America Inc. Unaudited Statements of Operations For the Three and Nine Months Ending September 30, 2012 and 2011 (in thousands) Three months ended Percent Nine months ended Percent September 30 Change September 30 Change 2012 2011 % 2012 2011 % OPERATING REVENUES Guest $ $ 26.3 $ $ 28.7 337,098 266,842 897,416 697,169 Other 30,946 23,794 30.1 85,005 63,141 34.6 Total operating 368,044 290,636 26.6 982,421 760,310 29.2 revenues OPERATING EXPENSES Aircraft fuel 142,870 110,143 (29.7) 406,696 306,787 (32.6) Aircraft rent 56,104 42,405 (32.3) 164,351 122,632 (34.0) Wages, salaries 43,823 35,323 (24.1) 129,576 101,562 (27.6) and related costs Aircraft 15,742 14,713 (7.0) 53,137 40,936 (29.8) maintenance Landing fees 29,494 22,530 (30.9) 82,308 63,454 (29.7) and other rent Sales and 28,309 20,647 (37.1) 81,050 61,561 (31.7) marketing Guest services 13,365 11,050 (21.0) 37,668 31,019 (21.4) and supplies Depreciation 2,953 1,953 (51.2) 8,225 6,743 (22.0) Other operating 19,554 15,646 (25.0) 56,247 44,881 (25.3) expenses Total operating 352,214 274,410 (28.4) 1,019,258 779,575 (30.7) expenses Operating 15,830 16,226 (2.4) (36,837) (19,265) 91.2 income/(loss) Operating margin 4.3% 5.6% (1.3) (3.7%) (2.5%) (1.2) pts pts Interest expense, 28,458 19,528 45.7 83,557 50,311 66.1 net Net loss $ $ 282.4 $ $ 73.0 (12,628) (3,302) (120,394) (69,576) EBITDAR $ $ 23.6 $ $ 23.3 74,887 60,584 135,739 110,110 ComparativeOperating Statistics Three months ended Percent Nine months ended Percent September 30 Change September 30 Change 2012 2011 % 2012 2011 % Available seat miles 3,375 2,576 31.0 9,424 7,198 30.9 (ASMs)(millions) Departures 15,152 11,693 29.6 42,321 32,651 29.6 Average stage 1,571 1,566 0.3 1,573 1,573 - length (miles) Aircraft in service 52 39 33.3 50 37 35.1 (average) Fleet 12.1 12.7 (4.7) 12.4 12.7 (2.4) utilization Guests 1,688,744 1,370,678 23.2 4,717,908 3,656,615 29.0 Average fare $199.62 $194.68 2.5 $190.21 $190.66 (0.2) Yield per passenger mile 12.55¢ 12.30¢ 2.0 11.91¢ 11.93¢ (0.2) (cents) Scheduled revenue 2,687 2,170 23.8 7,533 5,846 28.9 passenger miles (millions) Load factor 79.6% 84.2% (4.6) pts 79.9% 81.2% (1.3) pts Guest revenue per available 9.99¢ 10.36¢ (3.6) 9.52¢ 9.69¢ (1.8) seat mile (cents) Total revenue per available 10.91¢ 11.28¢ (3.3) 10.42¢ 10.56¢ (1.3) seat mile (cents) Cost per available seat 10.44¢ 10.65¢ (2.0) 10.82¢ 10.83¢ (0.1) mile - CASM (cents) Cost per ASM, excluding fuel 6.20¢ 6.38¢ (2.8) 6.50¢ 6.57¢ (1.1) (cents) Fuel cost per $3.28 $3.25 0.9 $3.34 $3.25 2.8 gallon Fuel gallons consumed 43,587 33,911 28.5 121,765 94,441 28.9 (thousands) Teammates (FTEs) 2,406 2,022 19.0 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 five years flying, Virgin America was named "Best Domestic Airline" in the Condé Nast Traveler 2008, 2009, 2010, 2011 and 2012 'Readers' Choice' Awards and "Best Domestic Airline" in Travel + Leisure's 2008, 2009, 2010, 2011 and 2012 '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 Website: http://www.virginamerica.com Contact: Abby Lunardini +1-650-533-7576, Abby.email@example.com ; Jennifer Thomas +1-650-274-7329, Jennifer.firstname.lastname@example.org
Virgin America Reports Third Quarter 2012 Financial Results
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