Virgin America Earnings: Still Losing Money, But Less than Before
I'm generally not that interested in dissecting every little piece of airlines earnings... except when it comes to Virgin America. I've been following these guys closely since the very beginning, and I was eagerly awaiting fourth quarter results. As I wrote after their third quarter results:
Remember, this is the third quarter and it's the easiest quarter to make money. A single almost-profitable quarter in the summer, while good news, is not an indication that all is rosy now. If they can pull out a profit in the fourth quarter, then that's a different story.So did they pull it off? No. But the news isn't all bad. They posted a net loss of $18.7 million in the quarter and an operating loss of $10.2 million. Those were both dramatic improvements versus the previous year, but it's definitely not a profit.
Available seat miles (number of seats x number of miles flown) grew 41.9 percent. The only other airline to see growth even close to that was Allegiant. And why shouldn't they? They're solidly profitable. Virgin America, not so much.
The real reason their loss narrowed so much wasn't thanks to growing revenue. Adjusted for the longer average flight length (longer flights have lower unit revenue) in the quarter, unit revenues were down 1 percent. But it was cost-reduction that did wonders for the income statement (even though they didn't give us the flight length-adjusted cost numbers). And really, they should. Virgin America is small enough that it should be able to bring down its unit costs by adding incremental flying. At this stage, it doesn't cost much to add an airplane or two. You get better use out of the rest of your infrastructure.
But again, we need to look at the all-important cash number. Cash is down to only $22 million. That's just a bit lower than in the third quarter, but there was a big structural change in the fourth quarter that helped them gain (re) approval for being a US citizen. They now have $107 million in an irrevocable line of credit that can be drawn with five days notice.
Not a great quarter for the airline, but it was certainly better than last year. That breathing room in terms of cash position must be nice, and with industry revenue trends looking up, it could end up being a much better year for Virgin America in 2010.