Monthly Archives: August 2009

Virgin America Has Stopped the Financial Bleeding…Mostly

Virgin America released its 2nd quarter financials, and it looks like the bloodbath is over.  There was a point earlier this year where it wasn’t entirely obvious that, if they continued on the same financial path, that they would make it another year.  They were burning cash like mad and charging virtually nothing for their (admittedly strong) product.

Although they’re not out of the woods, they’ve certainly turned it around.  Their operating loss was only $11 million, compared to more than $62 million in the same quarter last year.  Load factor was up to 85% from 77% and their RASM (a rough measure of average fare) was nearly flat at just under 8 cents per mile (not great, but at least there wasn’t a huge drop).  In short:  they filled more seats on their planes without resorting to lowering fares from previous quarters (sure, you could argue that their fares are ridiculously low to begin with and that they constantly have sales, which they do).

Most importantly, though, as Allegiant has shown you can also focus on the cost side of the business to make an airline work.  Virgin America dropped their Cost per Available Seat Mile (CASM) to 6.47 cents from 8.18 year over year.  Impressive.

Unfortunately, the full detail isn’t yet available, so it really isn’t possible to see where the cost savings is coming from.  Also, they’ve got about $28 million in cash left, which isn’t a huge cushion when they’re burning through about $10 million a quarter.  They say they’ll be fine until they’re profitable last year (and they noted they were profitable in June and July of this year), but airlines aren’t yet sure whether business travelers will return this fall.  And with VA just announcing another fare sale, it sounds like they still have no pricing power, leaving it to sales to fill up the planes.  Without a strong Q3, their cash will approach a precarious spot. Plus, Alaska Airlines continues to harass the DOT to open an inquiry into whether VA has sufficient US ownership.

Virgin America has certainly made headway toward survival.  But that cash position is rough, and the market continues to be uncertain.  They’ve shown a renewed financial discipline, which suggests to me that they’ll be able to make it.  But they, along with US Airways (and possibly United), are the two shakiest airlines right now.

The OTR on Vacation and 8 Great Airline Commercials

The OTR is on vacation this week, but I’ll leave you with this set of 8 great airline commercials

Naked Passenger Cause Southwest Flight to Return to Airport

Hoo boy…A passenger on a Southwest Airlines flight from Oakland to St. Louis stripped naked, punched another passenger in the face, and was then arrested when the plane returned to the gate at Oakland (you’ll enjoy the photo on the linked page).  Really, what more is there to say?  People are nuts about Southwest.

JetBlue Sells Out of Unlimited Flight Pass 3 Days Early

JetBlue has announced that they sold out of their all-you-can-fly pass 3 days before the promotion was scheduled to end.  This is a bit unusual, frankly, which suggests one or more of a few things:

1) They must have sold quite a number of these passes, because the official reason for ending the sale is that they wanted to ensure people could actually get on flights; or

2) They just blew an enormous amount of goodwill generated by the promotion; or

3) Both of the above; or

4) They could’ve continued to tell the passes, then when people couldn’t get on flights they wanted they would’ve whined/Tweeted/blogged about how they purchased passes but couldn’t actually get on the flights they wanted.

JetBlue will take a minor PR hit from people complaining about the promo ending early; but let’s be realistic – if you were interested you shouldn’t have waited til the last minute.  Boo hoo.

Ryanair Forces 9-Year-Old Girl to Pay 10 Euros for Lost Purse

Always cuddly Ryanair told a 9-year-old girl that she would have to pay 10 Euro for the return of her lost purse at Dublin Airport. The girl had done a bit of shopping in Dublin airport and lost her purse, which contained about 42 Euro she had saved for a vacation.  After a number of phone calls, her father was able to track down the purse, but when he went to retrieve it Ryanair staff told him he would have to pay 10 Euro to get it back (of course he paid it).

The fee is ultimately paid to a vendor who handles lost items for the airline, but, as you can imagine, the British press is having a bit of a field day with this one.  CEO Michael O’Leary can yap about toilet charges and stand up seats all he wants, but the reality is that they make money any way they can – even from little girls.  Nicely done!

Shahrukh Khan, “India’s Brad Pitt,” Stopped for Questioning at Newark Airport

Shahrukh Khan, described by some as India’s Brad Pitt, was detained for questioning for an hour at Newark Airport while traveling on his way to Chicago (I think “India’s Brad Pitt” understates his popularity – while I was in Delhi from what I could tell Mr. Khan was in every single Bollywood movie and appeared on every single talk show.   I had never seen anything like it.)  The interrogation has caused a bit of an uproar in the Indian-American community and sparked discussion about profiling at airports (Khan is Muslim).

For its part, although Customs officials won’t say why Khan was stopped, they said it was rather routine to pull people aside for secondary questioning, and that the discussion lasted as long as it did only because the airline misplaced (aka “lost”) his luggage and they had to wait for it to be located before Khan could be released.

And in a coincidental twist, Khan was here to promote his new film, “My Name Is Khan,” which is about racial profiling of Muslims.

Southwest Airlines Will Not Join Mile High Club, Loses Frontier to Republic

In what I think has to be the most shocking airline business story since, um, I don’t know, Southwest Airlines has lost its bid for bankrupt Frontier Airlines to Republic Airways Holdings.  You’ve no doubt seen the news elsewhere, but the very short version (if for God knows what reason you’re relying on the OTR for your news) is that although Southwest outbid Republic, their bid was contingent on working out a pilot labor agreement with Frontier’s pilots.  Southwest’s offer to essentially tack Frontier’s pilots on to the end of the seniority list was turned down by Frontier, and the bid fell apart.

So, where does this leave us?

– If Southwest had to manage an unhappy pilot group at Frontier, it would have been a disaster, both from a labor management standpoint and from a cultural standpoint.  Southwest’s culture is a key piece to their success, and labor strife would have caused havoc.

– Republic Airways has done a nice job diversifiying from their regional carrier status, recently picking up both Frontier and Midwest.  Interesting that just a few years ago ExpressJet thought they could do better as a standalone carrier than as a regional airline and failed; and ACA thought it could do better as a standalone carrier than as a regional airline and failed.  There’s a big difference between running a regional airline and a standalone – Republic is being smart by running Frontier and Midwest as independent businesses.  I don’t expect to see the Republic name plastered on these jets any time soon.

– Southwest has really not made a single major misstep in 35+ years of operation.  This is the first real public takedown of the airline I can think of (although in the long-run, with the labor issues that were brewing, it may turn out to be a blessing).

– After all the talk of what would happen once Southwest took over Frontier in Denver, it looks like not much will change there after all.

This is just a crazy shocker…

The JetBlue Pass: All-You-Can-Fly in One Month for $599

A brilliant marketing idea (even if they don’t profit from it):  JetBlue is offering a 1-time, $599 pass good for as much travel as you can squeeze in from September 8 – October 8 (one flight per day, please) across their entire network.  International fees (which can add up) are not included.  You have to actually book the flight 3 days in advance, and if you don’t show up they’ll ding you for $100.

The best part?  If you already have a flight booked during that time, you can pay the difference between $599 and the fare and get the pass and fly all you want for the month.

(A quick additional note:  Eastern Airlines sold a similar pass to similar destinations back in 1980 — 21 days unlimited travel for about $400 tax included.  More detail here:

http://www.airliners.net/aviation-forums/trip_reports/read.main/112504/

Just goes to show what a steal this is…)

Two More Idiots Mistakenly Go to Sydney, Nova Scotia, not Sydney, Australia

For the 4th time that I’m aware of , two idiots thought they had booked a trip to Sydney, Australia but ended up in Sydney, Nova Scotia.  A Dutch man and his grandson booked what they thought were tickets Down Under, but it wasn’t until they departed from Halifax in a tiny plane did it occur to them that this very small aircraft would not be able to make a 9,000 mile nonstop journey.  Air Canada, for their part, got them a free room at a hotel in Sydney, NS, and sent them back to Amsterdam to figure out what the hell went wrong.

Times of London: Ryanair Often More Expensive Than British Airways

The Times of London conducted a little investigation into whether Ryanair’s flights are actually as inexpensive as the airline claims to be.  The hunch was that the constant piling on of fees has caused a huge increase in the actual price paid.

The answer?  On ten popular short-haul routes from London to Europe, British Airways was cheaper on 7 of them.  On three of those routes BA’s base fares were even cheaper than Ryanair’s fares.  They give an example of someone checking 20kg of baggage and buying a snack:  That would cost GBP 194 on Ryanair, while it’s free on BA.  For everyone who has flown Ryanair and been extremely annoyed with the fee situation, this should be a small comfort.

The key takeaway (even in the US…):  It’s annoying, but you have to do a little legwork beforehand and figure out the fees.  Tripadvisor’s flight comparison tool includes ancillary fees, so that’s a good place to start.  The fees aren’t going away, and the government isn’t about to step in and regulate how fees are advertised.