Virgin America (San Francisco) today reported its financial results for the first quarter of 2015.
Key highlights from the first quarter include:
First quarter 2015 net income was $10.5 million excluding special items1, an increase of $32.9 million from the first quarter of 2014. Operating income and operating margin excluding special items were $13.1 million and 4.0 percent, respectively.
On a GAAP basis, net income was $12.8 million. This represents the first time in its history that Virgin America has recorded a profit in the first quarter of the year, and the tenth consecutive quarter of year-over-year improvement in profitability. Operating income and operating margin on a GAAP basis were $15.4 million and 4.7 percent, respectively.
Fully diluted earnings per share excluding special items was $0.24. On a GAAP basis, fully diluted earnings per share was $0.29.
“Virgin America continues to perform exceptionally well, achieving net income of $10.5 million excluding special items in the first quarter of 2015,” said David Cush, Virgin America’s President and Chief Executive Officer. “This marks the tenth consecutive quarter of year-over-year improvement in our financial performance, off the back of a record year of profitability in 2014. This is a testament to our business model, our product and Teammates who delivered an outstanding experience for our guests.”
First Quarter 2015 Financial Highlights
• Operating Revenue: Total operating revenue was $326.4 million, an increase of 4.1 percent over first quarter of 2014.
• Revenue per Available Seat Mile (RASM): Passenger revenue per available seat mile (PRASM) increased 2.6 percent compared to the first quarter 2014, to 10.27 cents. Year-over-year PRASM growth was driven by a 0.9 point increase in load factor and a 1.4 percent increase in yield. Total RASM increased 2.7 percent year-over-year.
• Cost per Available Seat Mile (CASM): Total CASM excluding special items decreased 5.5 percent compared to the first quarter of 2014, to 11.11 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 $2.1 million accrual for teammate profit sharing and payroll taxes related to 2014 profit sharing. CASM excluding special items, fuel costs and profit sharing for the quarter increased 3.0 percent year-over-year, to 7.82 cents.
• Fuel Expense: Virgin America realized an average economic fuel cost per gallon including taxes and the impact of hedges of $2.45, which was 22.7 percent lower year-over-year. This amount includes certain fuel expense adjustments described as special items below.
• Special Items: Special items in the first quarter of 2015 relate to $2.3 million of adjustments for fuel hedges that settled during the first quarter of 2015 but for which unrealized losses had been previously recorded under GAAP and mark-to-market adjustments for fuel hedges that mature subsequent to March 31, 2015, which did not qualify for hedge accounting treatment.
• Operating Income: First quarter 2015 operating income excluding special items was $13.1 million, an increase of $26.3 million as compared to 2014. The Company’s operating margin excluding special items of 4.0 percent, improved by 8.2 points year-over-year.
• Net Income: Net income excluding special items for the first quarter was $10.5 million, an increase of$32.9 million year-over-year.
• Fully Diluted EPS: Fully diluted earnings per share, excluding special items, was $0.24 for the first quarter of 2015. First quarter 2015 fully diluted earnings per share was $0.29 on a GAAP basis.
• Capacity: Available seat miles (ASMs) for the first quarter of 2015 increased 1.5 percent year-over-year compared with the first quarter of 2014. The airline was affected by severe winter weather, reducing capacity growth by 1.5 percent versus the Company’s original plan. Virgin America ended the quarter with 53 Airbus A320-family aircraft, unchanged from the first quarter of 2014.
• Liquidity: Unrestricted cash was $418.3 million as of March 31, 2015.
2015 Aircraft Financing
Virgin America entered into agreements to finance approximately 80 percent of the purchase price of its five 2015 Airbus A320 aircraft deliveries. The weighted average interest rate on these financing commitments, if fixed at current underlying interest rates, would be under 5.0 percent.
Second Quarter 2015 Outlook
The Company’s expectations for the second quarter of 2015 are based on currently available information. These expectations are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under “Forward-Looking Statements” below. You should not place undue reliance upon these expectations.
The Company expects capacity, as measured by available seat miles, to decrease by approximately 0.0 percent to 1.0 percent for the second quarter of 2015 as compared to the second quarter of 2014. Based on current revenue trends, the Company expects PRASM to decrease between 0.0 percent and 2.0 percent versus the second quarter of 2014. The Company expects CASM excluding fuel and profit sharing to increase between 8.0 percent and 10.0 percent versus the second quarter of 2014. CASM excluding fuel and profit sharing is increasing in the second quarter due to a decrease in average stage length year-over-year of approximately 4.0 percent, additional maintenance costs expected during the quarter, and previously announced increases in salaries, wages and benefits.
The Company is targeting a full year 2015 increase in CASM, excluding fuel and profit sharing, of approximately 7.0 percent to 9.0 percent, primarily due to the previously announced increase in salaries, wages and benefits and to a decrease in average stage length. In 2016, the Company is currently targeting CASM, excluding fuel and profit sharing, to remain flat year-over-year.
Based on Virgin America’s hedge portfolio and current market prices for aviation fuel products, the Company expects Virgin America’s economic fuel cost per gallon inclusive of related taxes and hedge costs to average between $2.10 and $2.20 for the second quarter of 2015. This number may change depending on fluctuations in market prices for jet fuel during the quarter.
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