crazyMRer

- Every major US route has airlines already flying it. Minor routes tend to not have enough demand to fill planes profitably. So attempting to draw customers from competitors is a necessity for any upstart. What would you propose?

- IMO, VX believed they would be able to fill their planes with people willing to pay a premium over AA/UA for the better F seats or entertainment provided by VX. I think VX has been dissapointed how small a market is willing to pay a premium to fly VX.

What do you think VX should do to make a profit?

grt2106

Moving into a FF system that offers an actual value was probably a plus to their business, but may come as too little, too late. Customers who are flying for business are just so established with the 'legacies' that those perks of having many miles mean something to them. For so long VX ignored that.

Nicer planes are great, BUT, nothing is going to fix the horrible experience that flying brings in the year 2012. I think the next-big-airline idea is opening up flights in airports that aren't as awfully congested to really change the experience. Plus you can charge a load more-

How VX hasn't gotten into Santa Barbara or Monterey yet- or anything that could use a little drummed up business for routes that -could- become big. Hawaii is a great revenue booster too that you could swing with 1 larger plane.

Another revenue alternative that -could- prove lucrative is selling bulk amounts of tickets or all-you-can-fly tickets hoping to manage well on those. One advantage they have from B6 on this is trying to sell more concessions or movies on-board... but we all know that All-you-can-anything is quick to backfire. Those MCS packs sold like hotcakes on GiltCity, there may be a further market.

Finally, stop giving away so many deep discounted seats if it's costing you a bundle. VX is often the cheapest, and then a 20% discount to boot- it's great for me, but likely tough on the airline.

Ultimately though VX was just in the wrong place at the wrong time. Sadly for the airline industry to stay afloat we need higher prices and less competition.

Much like movie theaters, deep down passengers who pay with their own money are most interested in airlines that get them to their destination, have the most convenient times, and are the cheapest. A better product in-air means nothing, because the experience in coach is going to be a mediocre one at best.

VX should evaluate and very likely see a value in replacing F with 6 more MCS seats and 6 more coach seats. That would likely outrevenue 4 F's that are often only filled with inexpensive upgrades and require food and staff they do not need.

Doc Savage

Irrational exuberance.

BearX220

The kinds of people who are willing and able to pay the VX premium also need reasonable frequency and a fairly robust route network, which VX lack. And they aren't going to Cancun much. The Cancun trade will fly the cheapest way possible and save its pennies for more drinks.

There are all kinds of underexploited second-tier markets where VX could make an impact -- PIT, CVG, MEM, SAT, MCI, MKE, IND, ABQ, BNA -- instead of knocking its brains out on JFK-SFO against everybody else. They have business traffic and people who need to go to SFO, JFK, and LAX. The airline can make money by unlocking business travel demand in these underserved markets, not jumping into Hawaii or stupid experiments like PSP.

I will never understand the VX pricing strategy either come to think of it -- it's either much more expensive than the rest for a longer trip via SFO, or unnecessarily low-priced in the west coast corridor. Result: my college-age son likes VX. I never use it.

crazyMRer

JetBlue & Southwest have been looking for such opportunities for years and flying the few that they think will work. It is hard for an upstart to find a route that hasn't already been thought of, properly evaluated, and started by a competitor if it actually would work.
The cost of making large numbers of people aware/getting people to change their search/booking methods is also very high. How many people are searching for tickets from Monterey to Boston compared to LAX to Boston?

Hawaii is barely profitable for the legacies (relies on cargo revenue to work) and lacks a high % of business travelers (generally only business travelers pay more than an airline's cost per seat; everyone else is paying less than cost). It is also a place where VX has a disadvantage; heavy IFE equipped aircraft that will be out of range most of the journey. After Aloha went out of business Alaska Airlines carefully evaluated and entered every market Alaska Airlines thinks can turn a profit to/from Hawaii. The leftovers are not likely to make VX money.

Bulk tickets are sold by VX competitors below their cost/seat mile. That is the industry norm and airlines only do it to fill extra seats that would be likely to go empty. They would get less revenue per seat than they already do selling bulk tickets.
No airline does this cause they want to, including VX. Below cost tickets are sold out of desperation/necessity. Lets say you are a manager at VX: When planes are not filling up at profitable fares, would you rather fly them empty (no revenue per seat) or at below cost fares (some revenue per seat)?

Well said.

Let us remember VX has intelligent and experienced professionals whose entire careers are focused on making VX profitable. Most of what we can think of has already been considered by them.

crazyMRer

If there is unmet business demand, why haven't Southwest/JetBlue added capacity?

If Southwest/Jetblue route planners don't think those routes would be profitable for them, why would they be profitable for Virgin America?

VXCabinCrew

[QUOTE=BearX220;19457442]
"The airline can make money by unlocking business travel demand in these underserved markets, not jumping into Hawaii or stupid experiments like PSP."



I am a flight attendant, so I don't know enough about the inter-workings of the revenue department or route planning, but PSP was hardly a "stupid experiment". PSP was one of our most profitable destinations served last year, exceeding our expectations. In fact, it did so well for us, we are adding nonstop flights between JFK - PSP, as we realized much of the traffic flow between SFO and PSP was coming from the East Coast.

sfozrhfco

How is any US airline still in business? Every legacy carrier has filed for bankruptcy and some several times. If more legacies were gone VX would be doing all the better. The real question is why are there still legacy carriers operating in the US--despite decades of losses, sinking wages of employees, etc. etc. Virgin America is still a small player and their losses in absolute terms are peanuts compared to the losses racked up by legacy carriers over the last several decades. Will they survive over the long haul? Who knows...but the same question could be asked of any US airline.

GO_CAT

There are only a select few who know the ins and out of the financials of this company, Cabin Crew are certainly not one. They dont just go around telling everyone how profitable their routes are, that is behind closed doors stuff.

crazyMRer

Every legacy has made money part of the time (some years/quarters) in the last decade. Some of them made a lot of money during the previous decade. And weren't all of the legacies profitable last quarter?

Yes - the legacies have gone through major financial problems and bankruptcies - but that is only part of the story. American Airlines, the only legacy currently in financial trouble - has been in business since 1930 and their current filing is their first bankruptcy.

If legacies didn't make money at least part of the time, they would not be around now. Virgin America needs to prove they can make money at least part of the time or their business model will be dismissed as failed and the company will permanently dissolve.

SocalApproach

Delete

SocalApproach

That would require an additional flight attendant. Which wouldn't generate any additional revenue like you explained here. Matter of fact this would make them lose even more money. What you people dont understand is if VX offered its First Class for free that would tarnish the product and it wouldnt be what it is today which is a stand out alone product here in the US skies. Nothing comes close domestically. They would have to significantly worsen the product if it was free. Thats why when Im in first on Delta its nice and great but its not a big deal in all honesty. The reason they dont let you upgrade with points is because they want it to be available to everyone. That 300 dollars from economy to first class is not so great for you Mr Frequent Flier but for someone like a leisure traveler thats great knowing they only spend 149 on a fare and now they are flying the best domestic first class transcon for only 300 dollars. The only downside is they are getting less points per dollar spend where as VX knows business will pay upfront for First for their employees if they decided to contract with VX. There is only 8 first class seats. Whether anyone likes it or not VX is banking on making money with the other 141 seats and those 8 are just icing on the cake. They are not banking their bottom line on selling first class seats or else those 2 hour or less flights would be axed asap.

"There are only a select few who know the ins and out of the financials of this company, Cabin Crew are certainly not one. They dont just go around telling everyone how profitable their routes are, that is behind closed doors stuff."

^this statement is just false in every way. Airlines may not let out numbers down to the very last penny but VX is very open with its employees when it comes to things like this. Their employees are very aware of how the routes are doing if it concerned them in the least bit.

grt2106

So what you're saying is Virgin America already has it absolutely right, and they're just bleeding money because they're not selling enough headsets?

By the way, Delta Transcons from JFK to LAX or SFO are of superior quality.

eponymous_coward

Almost every single one of those markets you mentioned is haunted with the ghosts of carriers who've dropped frequencies or outright domination/hubs in those markets for more profitable ones: DL, F9, FL, YX, US. Somehow, I don't think that changes just because you have planes with mood lighting.

None of those markets could sustain anything remotely approaching the frequencies necessary to sustain a hub (which is why WN supports many of these markets through using frequencies to neighboring cities within 400-1200 miles, a more point-to-point model, though they pseudo-hub a lot of those markets through frequencies to MDW, DAL, HOU and LAS, and SAT is one of their core cities), nor does a model where you sell premium seats to people with disposable cash in the form of higher incomes work in a market where the demographics simply don't support it (because there's just not enough population density): if ABQ had bunches of people willing to drop cash on F flights, CX and SQ would be flying there.

You could maybe make an airline work based around that, but it wouldn't look like what VX does at all. It would look like WN- 10+ frequencies a day to markets you can reasonably sustain in second-tier markets, and the way you do that is routing planes something like MEM-SAT-MCI-MKE-LAS, which is basically how WN moves planes through their system. You also aren't going to get people to drop much in the way of premium fares for shortish flights (I work at a Fortune 1000 company where you have to be a director to travel TATL in C/J, let alone a SAT-ABQ short hop, and this is not all that unusual in my industry)- at best you'd be able to pull off what B6 does with enhanced Y. All that pretty IFE and mood lighting is a waste of cash, though- why do you think WN doesn't bother with it? Because it's just a bunch of dead weight on a plane that doesn't pay for itself on a day's worth of flying a plane OMA-MCI-MDW-PIT-MEM.

So what you're proposing might work for an airline- it does quite well for WN (who gets a lot of business travel on the down-low). But VX is bleeding cash already; the last thing that they need to do is reinvent the airline in such a way that they need to incur a bunch of capital costs to reconfigure the fleet in such a way that they can work with the reality that there aren't the same critical mass of hyperconnected Twittering urban professionals with six digit salaries in ABQ and CVG as there are in SFO.

SocalApproach

Yes, I'm saying for their model and how the airline has established themselves they are doing exactly what they should be doing. Its just not working. By no means am I confused as to why they are not making money. Its simple people will not pay more for a premium product because in the end in this economy price still means everything to way to many people. I would like to see how this year ends however as their markets will be very mature so the cost of growing will no longer be an excuse. You cant honestly say you expect them to abandon their approach of flying competitive routes with a premium service and start flying to secondary airports like jetblue do you? That would be insane and the airline is in too deep to do any of those crazy ideas Ive seen here.

Superior to who? Surly not VX