Virgin America Posts Another Loss in Its Flight Toward an IPOby
Virgin America has made it abundantly clear that it doesn’t want to remain a private company much longer. But the airline’s efforts to post consistent profits en route to an initial public offering suffered setbacks this winter, and the company on Friday reported a $22 million net loss for the first quarter.
The loss actually marked an improvement from the $46.4 million in red ink from a year earlier, and operating revenue rose 4 percent, to $313 million, while operating profit margin improved by almost 1 percent. “Given our network’s focus on transcontinental flying to the East Coast and with 30 percent of our revenue generated by New York markets alone, we bore the brunt of this year’s winter storms with a significant increase in cancellations,” Virgin America Chief Executive Officer David Cush said in a statement.
Will the loss delay a potential IPO expected for later this year? In February the Financial Times reported that the California-based airline had hired Barclays and Deutsche Bank to manage the offering. Virgin America declined to comment on Friday about its IPO plans. The company is owned by Richard Branson’s Virgin Group, its management team, and Cyrus Capital Partners, a New York hedge fund that manages about $4 billion.
Despite Friday’s disappointing earnings report, Virgin America can point to a full year of profits in 2013—its first in six years of flying—when it earned $10 million and sharpened its focus on higher revenue. It’s also easy enough to write off the winter quarter as a period of rare, one-off weather events that whacked the entire industry.
Plus, Virgin America will gain increased access in New York, Dallas, and Washington, D.C., later this year, three cities that offer a deep field of corporate travelers, as a result of divestments American Airlines Group was required to make for its merger with US Airways. That could lead to more sales at higher fares—definite catnip for a banker pushing an IPO.