VX still bleeding red because of fuel costs
 

http://www.virginamerica.com/press-r...l-results.html

Sooooooo... have to wonder how long they can keep bleeding money.

Their cash on hand has been staying around in the 25-30 million range, so that's nice, but at some point, something's got to give.

I'm not buying the "fuel cost" excuse. Airlines are blaming fuel for everything.

The vast majority of VX's flights have long stage lengths which equals poor aircraft utilization. Then there's the constant fare wars with AS, AA, WN, and UA pushing down yields.

Which VX starts half the time. As I type there's a vertical banner on this very page advertising $79 VX fares SEA-SFO.

LAX-SEA for $79 really shows the competition.

They have half a dozen aircraft that sit at JFK between 6am-5pm, everyday doing nothing. They could grow their base from JFK if they wanted to, obviously B6 would still kill them.

Alot of carriers out there are highly profitable at this time, even with the current fuel prices. Their cost base is clearly to high, they dont seem to be doing anything about it. These high fuel prices will be coming and going for foreseeable future, so what hope does VX have really?

They can fix dumb fleet utilization. They can stop igniting destructive fare wars that undervalue the excellent VX hard product. They can add frequency on profitable trunk routes / city pairs rather than fooling around with low-yield leisure routes that will never pay off. After that, if they have the fleet strength to open new stations, they can focus on second-tier cities suffering from single-airline tyranny or general lack of service: PDX, MSP, MEM, MSY, CVG, STL, CMH. (You could build a pretty good business around going into former hub cities abandoned or drawn down by the majors and connecting them to NYC, SFO and LAX.)

They can start more point-to-point transcons rather that funneling west coast pax through delay-prone SFO. They can fix their worthless FF program and target-market angry UA and DL loyalists who are open to changing their flying strategy.

There is lots VX can do that I wish they would start doing. With UA and DL actively repelling hordes of customers now is a great time. They should hire me.

As I mentioned, this is their biggest problem. They have too many planes flying for too many hours in the day on low cycle routes. This in turn translates into too few pax within the system.

I agree. Routes like PVR, MCO, and FLL are a waste of an airplane for low yielding destinations.

That doesn't solve their utilization issue though. Other than PDX, those routes have long stage lengths as well. VX should focus on intra-west routes where their aircraft can achieve a higher number of cycles per day. PHX/TUS, PDX, DEN, SLC, ABQ are good candidates.

They will need a mid-country hub at some point. STL seems like the best candidate.

^
This combined with no PHX flights keeps me from choosing VX.

The irony of this is is that their product really becomes valuable on longer flights. People might be willing to pay a significant premium for IFE and whatnot on a 6 hour transcon, but for short hops, they might as well be another Southwest where people want frequency, not movies that they don't have time to watch.

Legacies and even B6 manage to achieve pretty good utilization of their aircraft flying transcons - by choosing a smart mix of long as well as medium and short routes, they can rotate aircraft through different routes that are a good use of flight hours. VX needs to be smart about choosing the intra-west routes and learn how to properly rotate the aircraft through them rather than entering a few new airports, throwing a few new aircraft at them and being done with it.

Or CVG or even PIT. You have a point about RPMs being depressed by longer sector lengths, but I don't think they can or should limit themselves to being an intra-west airline. I think they should prioritize airports where there is unmet demand and reduced legacy dominance, and make a business out of taking those people to LAX, SFO, JFK and BOS, with a few nonstop transcons overlaid. I would stay out of DEN and SLC. TUS, ABQ, SAT, maybe MCI are all good candidates. Places with some sleeping business-travel demand.

Well said.

VX is limited to 10 R/T slots daily at JFK. Enough to have a decent JFK to LAX/SFO presence; but impossible to add to.

You also forget that these other carriers enjoy the benefits of economies of scale; whereby adding/cutting service is only a marginal cost. For WN, for example, adding 5 R/T daily from say, SFO-BUR would be a minor deal when you run well over 3500 daily flights. For a carrier like VX, running roughly 100 flights a day, adding SFO-BUR(SNA) for example would be about 5% of capacity, a huge amount for any carrier. Plus, since a carrier like WN already has many established stations dotting the map, the station startup costs are already amortized; unlike VX, who has to start everything from scratch.

:rolleyes:

Long stage lengths usually equals better utilization. VX has close to 13 hours of utilization a day; better than any domestic fleet in the US. VX also starts most fares sales.


6 aircraft sit 11 hours a day at JFK? I have not looked at their rotations but I doubt this is true.

Capacity is not measured in flights. It is measured in ASMs. A SoCal add is a very small increase in ASMs.

VX did fly SFO-SNA but it didnt work.

They also need high utilization much more than any of their competitors, given that all their aircraft are really brand new and cost a fortune.

If they really are starting fare sales/wars, then that is incredible stupidity on their part, given that they really need the money, and if they manage to fill the plane with people buying the sale tickets and make no profit, then that is a huge opportunity cost being lost. Other airlines can afford it more simply because they are bigger, yet they do far less often.


Just from looking at flightstats.com, it seems that 4 aircraft overnight at JFK (9-10 hours) and another one sits around for about 5+ hours during the day.
They also seem to be relying on one hour turns for their afternoon flights, but at JFK that's just asking for trouble if they care about their on time performance at all.

:rolleyes:

Utilization referring to the number of cycles. There is no way that long stage lengths equals better utilization when you have a small fleet and are facing downward pressure on your yields.

They're all over the lot. They cut prices way below route norms to promote sampling behavior -- they're currently doing $76 SEA-SFO, $99 SFO-DFW, etc. which should not be necessary to fill VX planes if they were marketing the product right. It's crazy. But then you go back and search a route six months later and they're the most expensive option. Cheapest mid-October SEA-JFK transcon RT on VX is $796, which is crazy in a different way, especially as all the routings are via SFO or LAX. Delta competes with $349 RT nonstops.

I have to go SEA-NYC two or three times this fall, and I'm in an up-yours-UA, let's-try-something-new mood, but not at those prices. I did book my kid a cheap weekend with friends in SFO @ the no-profit, below-cost $76-each-way rate though.

They're not building habitual booking behavior and steady customers because they're teaching people to hold back until VX holds the fire sales.

As a UA 1P sinking to 2P next year, the UA tier changes will definitely drive me to fly VX more often, since I most likely won't get past 2P again next year. This is a golden opportunity for VX to enhance their FF program to give some benefit to their frequent flyers (even a token gesture is better than nothing).