Please ensure Javascript is enabled for purposes of website accessibility

Virgin America Inc. Earnings Soar Ahead of Deal With Alaska Air Group

By Joe Tenebruso - May 3, 2016 at 1:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Capacity increases and lower costs fueled a more than 70% jump in the airline's profits.

Image Source: Virgin America.

Virgin America (VA) reported first-quarter results on Thursday, delivering sharply higher profits ahead of its proposed merger with Alaska Air Group (ALK -1.06%).

Virgin America results: The raw numbers


Q1 2016

Q1 2015

Growth (YOY)


$364.009 million

$326.351 million


Adjusted Net Income

$18.358 million

$10.523 million


Adjusted EPS




Source: Virgin America Q1 2016 earnings press release.

What happened with Virgin America this quarter?
Available seat miles for the first quarter increased 15.8% compared to the prior-year period, with Virgin America ending the quarter with 58 Airbus A320-family aircraft in service, up from 53 aircraft at the end of Q1 2015.

Passenger revenue per available seat mile, or PRASM, decreased 3.8% year over year to 9.88 cents, driven by a 3.7% decrease in yield (average fare paid per mile per passenger) to 12.34 cents per passenger mile. Total RASM decreased 3.7% year over year to 11.15 cents.

Total cost per available seat mile, or CASM (excluding special items) declined 8.8% compared to Q1 2015 to 10.13 cents, primarily due to a 35.9% drop in fuel costs.

Those lower jet fuel prices helped adjusted operating income soar 152.8% to $33.2 million, with operating margin improving 5.1 percentage points to 9.1%.

All told, adjusted net income surged 74.5% to $18.4 million, and 70.8% on a per-share basis to $0.41.

What management had to say
"Virgin America performed exceptionally well as we entered 2016," said CEO David Cush in a press release. "We reported record first quarter net income driven by continued unit revenue outperformance as compared with the domestic industry and the benefit of lower fuel costs. Importantly, we achieved these results with capacity growth of nearly 16 percent in the first quarter while also maintaining our focus on non-fuel unit costs."

Looking forward
Due to its proposed merger with Alaska Air Group, Virgin America said that it would no longer be providing forward guidance. The company also declined to provide any information in regard to the timing of the closing of the transaction with Alaska Air Group. Cush did, however, take time to highlight Virgin America's success during the company's conference call. 

Before Virgin America started operating, the flying experience was dismal. ... Today, in large part [due] to Virgin America, we believe things have changed. We've shown the industry the notion that you either have to be a legacy carrier with a legacy cost structure and legacy fares or you can be a no-frills low-cost carrier, but that's a false choice. We've shown that you can provide a premium product and experience, and that you can create an airline people actually want to fly and provide that experience at lower fares than the other guys offer and basically by running a highly efficient operation, which we have done.

Cush went on to say that Alaska Airlines has similarly reduced its cost structure and invested in its services.

"We look forward to joining forces with them to bring more high-quality, low-fare service to more markets across North America," he said.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Virgin America Inc. Stock Quote
Virgin America Inc.
Alaska Air Group, Inc. Stock Quote
Alaska Air Group, Inc.
$40.05 (-1.06%) $0.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.