Yes, I'm sure that's their business plan... routes with lots of competition and little profitability. :rolleyes:

SFO/LAX-JFK is high competition but also one of the most profitable routes in the US.

Routes:

SFO-JFK--B6, UA, AA, DL
SFO-IAD--UA, AA (UA hub to hub route with widebody's)
SFO-SAN--UA, WN
SFO-LAS--UA, US, WN
SFO-LAX--UA, AA, WN, AS and F9 recently failed
SFO-SEA--UA, AS, WN from OAK/SJC
LAX-JFK--B6, UA, AA, DL
LAX-IAD--UA, AA (UA hub to hub)
LAX-SEA--DL, AS, UA, WN 1-stop through RNO/SMF/OAK/SJC

The routes have lots of competition

Profitability:

The numbers speak for themselves. $35 million in first 3 months on $17.1 million revenue. http://www.marketwatch.com/news/stor...955D48A8F4C%7D while I know the first 3 months were tough for VX, I don't have latter data to back up my claim. However, to break even VX would have needed to charge 3X the amount they recieved. Also, according to the article VX had a yield of 9.32, very low.

:rolleyes:

Duh, I almost hesitate to try to explain this to the uninformed but here goes. VX is a start up. Start ups lose money during the start up period because they have fixed costs (overhead) designed to support a future, as yet unattained level of operation. Even if they fill 100% of their seats today, they will lose money until they achieve a higher operational scale. That's why they call it a "start up" operation.

That VX will have to charge 3X what they currently receive is nonsense. They merely have to achieve their business plan by expanding their flights to match their overhead and make intelligent decisions to pick markets where they can make money. They are the only airline based in either of the west coast's two big rich markets and will likely continue to focus on domestic flights to or from either SFO or LAX... stated initial plan is 25 non-stop destinations from SFO, presumably all on routes already served by other carriers.

Have you even flown VX? IMO they are the best US airline today and many of us go out of our way to fly them... on the same routes as other airlines, despite our having elite status with those other airlines. Try finding an F seat SFO-JFK, now as much as $799 one way and still selling out weeks in advance.

Want another reason why they will survive and prosper? How about two words: Richard Branson.

Thanks SFO777, I just couldn't bring myself to try again to explain that the first quarter's financials have absolutely nothing to do with the viability or profitability long term of VX. Never mind the fact they had 90 days of operational costs and something on the order of 45-60 days of revenue.

This has nothing to do with the "route profitability" of the routes you mention. Don't you think it costs a startup airline more in non-revenue-producing expenditures in their first quarter of operation than it will down the line? There are all sorts of expenses relating to getting aircraft in service, opening up airport facilities, and higher marketing costs for brand awareness.

What you really want to look at are load factors as they change over time.

Note that even JetBlue lost $21 million in their first year of operation.

If someone else has more recent financial data for VX I would be happy to use it. I just used the most recent data to mu knowledge. How much of the 1st 3 months can be attributed to start up costs? Would someone like to inform me of that?

VX recieving 3X what they got to break even is not nonesense. If you multiply incomeX3 it equals expenses. What is wrong with that logic?

A start up airline in a UA hub fighting UA on every route. Sounds like DH. With obvious fleet changes (CR2 to A32X).

I will fly VX on Tuesday when they open SEA. I will decide more then.

I thought VX had to be disassociated from Branson as an agreement with the DOT. Is that not true?

Even if B6 lost 21 million in their first quater 35 is much greater than 21.

Until VX can prove that they are profitable I will assume that they are not based on the most recent financial data.

Because you're assuming they could charge 3x more. If they did, revenue might have been even lower with all the lost pax.

Still, the loads reported to DoT have been very weak, although I'm glad to see IAD-SFO beating all the others. Your points about excessive competition on their routes can't be ignored.

Saw one today at a Metro station.

Branson had to own less than 25%. He's still very associated.

B6 lost 21 million in their first year, not their first quarter. VX could theoretically do the same thing, but it's doubtful. IMO, B6 was the most successful airline startup I could ever imagine.

They don't need to be profitable right away, and they have the money to ride it out. They certainly don't need to "charge 3x the amount they receive to break even". The flaw in that logic is that it doesn't take into account that they could spend less on costs that don't result directly in revenue.

I must have misread the B6 loss. I doubt VX will be able to make a profit of 14 million over the next 9 months to get to a 21 million looss over the year.

I believe DH also had the money to "ride it out." They steadily lost $ until they eventualy folded.

What could VX do to "spend less on costs that don't directlu result in revenue"?

I just don't get the obsession with evaluating VX's profitability this early in their business plan. If nothing else, have you read articles like this one, which clearly point to a plan that doesn't result in black ink in the near term?

Buying airplanes (or down payments), paying upfront gate and ticket counter fees and other deals with port authorities, costs associated with hiring of initial staff, city licenses and permits, and brand recognition should get cheaper and cheaper as the name gets known.

I have never started or run an airline, so these are obviously just guesses. I have started several companies, and I have used my experience there to come up with these based on my unrelated experience.

As far as the economics of a startup goes, think about this:

Average total cost=Total cost/Quantity=Average fixed cost+Average Variable cost

Given this: average fixed cost=Total fixed cost/quantity
average variable cost=total variable cost/quantity

The fixed cost is, well, fixed. Quantity (# of flights/seats/however you want to define it) is very low right now and increasing by the minute. In the short run, VX is going to have a very high AFC because of the high fixed costs involved in running an airline and because well, quantity of services offered is low right now. In the long run, the AFC will disappear into irrelevancy.

TVC is now pretty high at the moment, but I'm sure it will go down as Virgin America strikes deals with local vendors and creates arrangements with them. AVC generally doesn't go down in the short or long run, but it's a part of the cost of doing business.

Bottom line, Virgin America is still experiencing economies of scale-approaching the bottom of the ATC curve.

Can Islip handle widebodies?

Anyway, I figured someone somewhere would be willing to pay more money to save several hours off the trip. At an average of 450mph, the whole trip can be done in 17 hours vs. 13 hours LAX-AKL+6 hours JFK-LAX+~4 hours connecting at the cluster.... that is LAX. In terms of net time, the nonstop saves about 5 hours vs. the connection at LAX, accounting for time zones. Maybe once daily and if the demand for a second daily is there, expand. Last I was at JFK though, Term 4 Concourse B was, like, deserted at about 2 in the afternoon.

I think it's one of those things where the supply isn't there and therefore nobody thought of it. The continental EWR-HNL sells for like $500 more than other flights.

Redeyes! Where are the Redeyes? Their demographic loves Redeyes.