SAN FRANCISCO, CA – Virgin America today reports its financial results for the second quarter of 2015. Key highlights from the second quarter include:
• Second quarter 2015 net income was $64.4 million excluding special items1, an increase of $27.5 million from the second quarter of 2014. Operating income and operating margin excluding special items were $67.1 million and 16.7 percent, respectively.
• On a GAAP basis, net income was $65.0 million. Operating income and operating margin on a GAAP basis were $67.7 million and 16.9 percent, respectively.
• Fully diluted earnings per share excluding special items was $1.46. On a GAAP basis, fully diluted earnings per share was $1.47.
“Our latest quarterly results are an affirmation of Virgin America’s business model – specifically, they demonstrate that we can deliver a better product and guest experience while also generating strong financial returns,” said David Cush, Virgin America’s President and Chief Executive Officer. “The progress we have made on financial performance over the past two years is remarkable, and we continue to outperform domestic industry unit revenue trends. Our guests love the outstanding product and service that our teammates provide and it shows in our financial results.”
Second Quarter 2015 Financial Highlights
• Operating Revenue: Total operating revenue was $400.9 million, an increase of 0.5 percent over second quarter of 2014.
• Revenue per Available Seat Mile (RASM): Passenger revenue per available seat mile (PRASM) increased 0.5 percent compared to the second quarter 2014, to 11.24 cents. Year-over-year PRASM growth was driven by a 0.2 point increase in load factor and a 0.3 percent increase in yield. Total RASM increased 0.6 percent year-over-year. Virgin America’s PRASM was positively impacted by a $3.2 million adjustment related to Elevate loyalty revenue, which increased PRASM by 0.9 percent.
• Cost per Available Seat Mile (CASM): Total CASM excluding special items decreased 5.1 percent compared to the second quarter of 2014, to 10.43 cents. Decreases in fuel costs and reduced heavy maintenance activity contributed to the decline in CASM, partially offset by increases in salaries, wages and benefits. Salaries, wages and benefits costs included a $6.7 million accrual for teammate profit sharing and related payroll taxes. CASM excluding special items, fuel costs and profit sharing for the quarter increased 7.1 percent year-over-year, to 7.27 cents.
• Fuel Expense: Virgin America realized an average economic fuel cost per gallon including taxes and the impact of hedges of $2.20, which was 29.3 percent lower year-over-year. This amount includes certain fuel expense adjustments described as special items below.
• Special Items: Special items in the second quarter of 2015 relate to a net $0.6 million adjustment for fuel hedges that settled during the second quarter of 2015 but for which unrealized gains or losses had been previously recorded under GAAP and mark-to-market adjustments for fuel hedges that mature subsequent to June 30, 2015 which did not qualify for hedge accounting treatment.
• Operating Income: Second quarter 2015 operating income excluding special items was $67.1 million, an increase of $20.0 million as compared to 2014. The Company’s operating margin excluding special items of 16.7 percent improved by 4.9 points year-over-year.
• Net Income: Net income excluding special items for the second quarter increased by $27.5 million year-over-year to $64.4 million.
• Fully Diluted EPS: Fully diluted earnings per share excluding special items was $1.46 for the second quarter of 2015. Second quarter 2015 fully diluted earnings per share was $1.47 on a GAAP basis.
• Capacity: Available seat miles (ASMs) for the second quarter of 2015 remained flat year-over-year compared with the second quarter of 2014. Virgin America ended the quarter with 53 Airbus A320-family aircraft, unchanged from the second quarter of 2014. Subsequent to quarter end, the Company took delivery of the first of five Airbus A320 aircraft scheduled to be delivered in 2015.
• Liquidity: Unrestricted cash was $500.5 million as of June 30, 2015. Virgin America benefited from the release of cash collateral held by its credit card processors in addition to strong operating cash flow performance to generate a net increase of $82.2 million in unrestricted cash during the quarter. The new agreement with its credit card processors also allowed the Company to terminate a $100 million letter of credit facility, resulting in ongoing annual savings of approximately $5.5 million per year.
“Virgin America made great strides in improving its balance sheet and financial position during the second quarter of 2015,” said Peter Hunt, Virgin America’s Chief Financial Officer. “We increased our unrestricted cash balance by $82 million during the quarter thanks to strong operating cash flow and the release of collateral held by our credit card partners. We also terminated a financing facility that will save us over $5 million in financing costs annually. In addition, we arranged bank debt financing for five A320 aircraft deliveries occurring later in 2015 at interest rates that will average under five percent. These accomplishments will continue to reduce Virgin America’s cost of capital and position us for future earnings growth.”
Recent Operational Highlights
• Virgin America announced a new partnership with broadband and communications technology and services provider ViaSat Inc. that will bring significantly faster WiFi connectivity and high-quality video streaming to the airline’s 10 new A320 aircraft deliveries beginning in September of 2015. Virgin America maintains its distinction as the only U.S. carrier to offer fleetwide WiFi.
• Virgin America began rolling out a new beta version of its Red® in-flight entertainment system, which features higher resolution capacitive touch screens, Android-based software that will allow for faster, real-time updates and three times more content – along with the first surround-sound listening experience to be offered by an airline.
• Virgin America upgraded the back-end of its reservation system in late June, ultimately enabling it to sell ancillary products via Global Distribution Systems.
• For the eighth consecutive year, Virgin America was named ‘Top Domestic Airline’ in the prestigious annual Travel + Leisure’s World’s Best Awards readers’ survey, which evaluates all airlines for cabin comfort, in-flight service, customer service and value.
• Virgin America was also awarded ‘Best Airline in North America’ for the first time, ‘Best Low-Cost Airline in the U.S.’ for the fifth consecutive year and Best Staff Service among North American airlines for the fourth consecutive year in the 2015 Skytrax World Airline Awards.