Virgin America Unit Revenues Fall More Than 20 Percent

(MoneyWatch)  From the looks of Virgin America's press release announcing first quarter results, you would think the airline was turning in outstanding numbers. Unfortunately, that would be incorrect. Revenues are weak, and, as I said on Friday, cash is low. At least they're making progress on costs, but I'll save that discussion for my next post.

The reason Virgin America's comparison looks so good is because they were comparing first quarter 2009 with first quarter 2008. Back then, they were in start-up mode so their numbers were even worse. A better comparison is to fourth quarter 2008 to see what sort of progress they've made quarter-over-quarter. They used to do these comparisons on their own until they started looking pretty bad.

The numbers they report are a bit optimistic. See, they show all their revenues, including charter revenue, but they don't include available seat miles from charter operations. That means the unit revenue they're showing is somewhat inflated. The best way to look at this would be to pull out charter revenue, but I don't have that information. So instead, I've done the calculations to include charter available seat miles. It's not perfect, but quarter-over-quarter, it's should still be good enough.

On the revenue side, things fell of a cliff. Unit revenue plunged more than 20 percent from 8.97 cents to 6.85 cents. This resulted from a combination of weak load factor (down to 72.5 percent from 80.3 percent) and lower yields (down from 10.24 to 9.45 cents). In fact, their total revenue was basically flat compared to the previous quarter but with 13 percent more departures (thanks to the addition of Boston flying). That Boston flying also led to an 8 percent increase in stage length, something that will artificially push down the unit revenue number, so it's not quite as bad is it looks.

Still, this is worse revenue performance than other airlines in the quarter, and as we've seen from other carriers, the second quarter isn't looking any better. In fact, it's probably worse.