Virgin America

Virgin America
IATA ICAO Callsign
VX[1] VRD REDWOOD
Founded January 1, 2004
Commenced operations August 8, 2007
AOC # VQIA199L[2]
Hubs
Focus cities
Frequent-flyer program elevate
Airport lounge Virgin America Loft
Fleet size 63
Destinations 24
Company slogan A Breath of Fresh Airline
Parent company VAI Partners LLC (75%)
Headquarters Burlingame, California
Key people
Revenue Increase US$ 1.529 billion (2015)
Operating income Increase US$ 177.2 million (2015)
Net income Increase US$ 340.5 million (2015)[3]
Website virginamerica.com

Virgin America Inc. (NASDAQ: VA) is a United States-based airline that began service on August 8, 2007. The airline's stated aim is to provide low-fare, high-quality service for "long-haul point-to-point service between major metropolitan cities on the Eastern and West Coast seaboards."[4] It is headquartered in Burlingame, California in the San Francisco Bay Area and uses San Francisco International Airport as its main hub, but also has focus city hubs at Los Angeles International Airport and Dallas Love Field.[5][6] Virgin America's frequent flyer program Elevate provides award flights and other benefits to frequent fliers.[7]

Virgin America partners with many of the other Virgin-branded airlines and other Virgin Group brands, but it is a legally separate company. By law, no more than 25% of a U.S. airline may be owned by foreign interests and must be under the "actual control" of U.S. citizens.[8][9] VAI Partners owns 75% of the capital stock; the remaining 25% of the company is owned by the British Virgin Group,[10] which also licenses the Virgin brand to the airline.[11]

On April 4, 2016, Alaska Air Group announced it will acquire Virgin America for $57 per share. The acquisition is expected to be completed by January 1, 2017.[12] The total price for the acquisition will be approximately $2.6 billion.

History

In early 2004, Virgin Group announced its intent to start a new, United States-based, low-fare airline it named "Virgin USA". At the time, Virgin USA expected flights to begin by mid-2005. After considering several key areas, the San Francisco Bay Area was picked to be the location of its flight operations center, and later its corporate headquarters.[13] The airline also changed its name from "Virgin USA" to "Virgin America". Because it had trouble finding U.S. investors willing to gamble on a new airline, given the state of the already crowded U.S. airline industry, the launch date was pushed back from mid-2005 to early 2006.[14]

Opposition and setbacks

Virgin America secured its first amount of funding in late 2005 and submitted the required U.S. Department of Transportation (DOT) certificate application.[15] The approval process was filled with debate from the support and opposition of the new airline. City and state representatives from California and New York led the support for the airline. The biggest opposition came from the Air Line Pilots Association (a national aviation labor union) and existing competitor U.S. airlines led by Houston-based Continental Airlines. The review of Virgin America's application was prolonged because of this opposition, which claimed Virgin America would not be under U.S. ownership or control.[16] The application was denied by the Department of Transportation on December 27, 2006.[17]

In order to achieve the necessary approval, Virgin America proposed a restructuring of the airline: voting shares would be held by a DOT-approved trust and only two Virgin Group directors would be on the eight-person board. In addition, Virgin America said that it would consider removing Richard Branson from the board, and possibly even dropping the "Virgin" brand entirely.[18] The airline was also prepared to remove then-CEO Fred Reid"should the DOT find that necessary".[19]

Virgin America received its first Airbus A320 on February 24, 2006. The two inaugural flights on August 8, 2007 were on A320s named Air Colbert (named after comedian Stephen Colbert) and California Dreaming.

Clearance and take-off

"Air Colbert", the aircraft used on Virgin America's inaugural flight, on the ground at Seattle–Tacoma International Airport

Virgin America was tentatively cleared to fly by the U.S. DOT on March 20, 2007, but would not be given full permission until it changed its business structure by enacting several reforms as specified by the DOT. These reforms included the replacement of Fred Reid and the limiting of Virgin Group's influence on the airline.[20] Virgin America fought to keep Fred Reid as CEO,[21] However, as part of the DOT’s final approval in May, Reid was allowed to stay on nine months after the airline certification: six months as CEO and three months as a consultant.[22]

Virgin America started selling tickets in July 2007. Two years delayed, the airline made its inaugural New York and Los Angeles to San Francisco flights on August 8, 2007. In December 2007, C. David Cush replaced Reid as CEO of the airline.[23]

Virgin America reported a $270 million loss from August 2007, when it began operations, through the first two quarters of 2010.[24] The airline reported its first quarterly profit, of $7.5 million, in the third quarter of 2010.[25]

In early March 2009, there were reports that the U.S-based investors sold their stakes in Virgin America.[26][27] Virgin America's CEO refused to comment on "private financial matters", but stated that the U.S. investors had not decided that they wanted out of the company.[28][29][30]

On May 21, 2009, Virgin America became the first U.S. airline to offer Wi-Fi access via Gogo Inflight Internet on every flight. To kick off the service, Oprah Winfrey chatted with a flight attendant, Mandalay Roberts, aboard Flight 780 between Seattle and Los Angeles using Skype. Voice over IP will not be allowed on flights normally. The airline will charge for the service.[31] Between November 10, 2009, and January 15, 2010, the airline offered free WiFi with a subsidy from Google.[32] On December 17, 2014, Virgin America announced that it was now offering faster fleet-wide ATG-4 inflight WiFi service from Gogo, with speeds up to 9.8Mbit/s.[33] ATG-4 uses dual modems and directional antennas to achieve speeds that are 3 times higher than the first generation system.[34]

2010s

Virgin America's check-in area at Chicago O'Hare.

In March 2010, Virgin America announced its intention to start flying to Toronto from Los Angeles and San Francisco, which, pending government approval, would make it the airline's first international destination.[35] On April 2, 2010, the DOT approved Virgin America's proposal to fly to Canada,[36] and flights began on June 29, 2010.[37] However, due to high operating costs and higher demand for Dallas/Fort-Worth, Virgin America terminated Toronto service on April 6, 2011.[38] Virgin America began its service to Dallas/Fort Worth International Airport on December 1, 2010, with non-stop to LAX and SFO.

In 2010, Black Canyon sold its stake in the airline to VAI Partners, a group of investors led by Cyrus Capital Partners, headed by Stephen Freidheim.[39]

Virgin America announced in January 2011 a firm order for 60 new Airbus A320 aircraft that would be delivered starting in 2013, including 30 of the Airbus A320neo. This formalized and expands an initial commitment made at the Farnborough Airshow in July 2010.[40]

In April 2011, Virgin America’s hub at San Francisco International Airport relocated to the newly remodeled Terminal 2,[41] sharing the gates with American Airlines.[42] In late October 2011, the airline migrated to Sabre’s global distribution system (GDS) that handles reservations, frequent-flier accounts, flight operations data and crew scheduling, needed to “handle future growth”, according to the Wall Street Journal. Difficulties with the changeover sparked widespread customer complaints.[43]

On December 12, 2012, Virgin America introduced their first airport lounge, entitled the Virgin America Loft. The Virgin America Loft is located at LAX's Terminal 3 and drinks, snacks, and Wi-Fi are provided complimentary. While Elevate Gold and Elevate Silver members receive a select number of complimentary day passes each year, any passenger flying Virgin America or another Virgin America airline partner may purchase day passes to the Virgin America Loft.[44]

The Virgin America exhibit at the Frontiers of Flight Museum at Dallas Love Field

On May 12, 2014, Virgin America was awarded two gates at Dallas Love Field after a competition with Delta Air Lines and Southwest Airlines for the two gates, following American Airlines' divestiture of the two gates after an antitrust settlement with United States Department of Justice related to its merger with US Airways. Virgin America began service on October 13, 2014, following the expiration of the Wright Amendment and established a focus city, with non-stop service to Austin, San Francisco, Los Angeles, New York-LaGuardia, and Washington-Reagan. After its transition to Dallas Love Field, Virgin America will no longer offer flights from Dallas/Fort-Worth International Airport. In October 2014, Virgin America carried 30,951 passengers from Dallas Love Field during its first partial month of service there, while Southwest Airlines' business at the airport decreased by 4%.[45]

On October 15, 2014, Virgin America premiered a video on its YouTube channel titled Have you been flying BLAH Airlines?, a promotional film nearly six hours long, portraying in real time a flight from Newark to San Francisco via the fictional BLAH Airlines. Part of a larger social media campaign, the film was created by Eleven, an advertising firm in San Francisco. The video was viewed 75,000 times in its first 24 hours online.[46]

The airline listed on the NASDAQ stock exchange on November 14, 2014, selling 13.3M shares to raise $307 million for the company in its initial public offering.[47]

Alaska Air acquisition

In March 2016, the airline confirmed it was considering a sale.[48] Alaska Air Group and JetBlue Airways made offers to purchase the airline from Virgin Group.[49] On April 4, 2016, Alaska Air Group announced that it had agreed to buy Virgin America for $2.6 billion.[50] Including debt and aircraft leases, the transaction is worth about $4 billion.[51] In December 2015, Alaska was interested at $44.75 per share, before JetBlue manifested its interest in February 2016. A bidding war ensued culminating on March 31 and April 1 at $57 per share, 47% higher than the day's closure at $38.9.[52]

The acquisition is expected to be completed by January 1, 2017 and both airlines are planning to operate under a single air operator's certificate under the Alaska Airlines name by 2018.[53] Alaska Air Group will continue to honor the loyalty programs of both groups with no foreseen changes. Virgin America's founder Richard Branson stated that he was disappointed by the merger.[54] Should the merger agreement be terminated by Virgin America, they may be required to pay Alaska Air Group a termination fee equal to $78.5 million.[55] President and chief executive officer of Alaska Airlines, Brad Tilden, stated in June 2016 that Virgin America was being considered to remain as its own brand as a subsidiary of the Alaska Air Group.[56] Following the acquisition, chief financial officer of Alaska Airlines, Peter Hunt, will become the president of Virgin America, while chief operating officer and president of Alaska Airlines, Ben Minicucci, will become the CEO.[57] On July 26, Virgin America's shareholders approved the merger, leaving the approval by the United States Department of Justice as the only remaining hurdle.[58] However, on September 8, 2016 a lawsuit was filed towards Alaska Airlines by consumers to block the merger between the two carriers. [59]

Corporate affairs

Business trends

The key trends for Virgin America over recent years are shown below (as at year ending December 31):

2012 2013 2014 2015
Turnover (US$ m) 1,323 1,425 1,490 1,530
Net Profits (US$ m) −145.4 10.1 60.1 340.5
Number of employees (full & part-time, year end) 2,509 2,660 2,672 2,911
Number of passengers (m) 6.2 6.3 6.5 7.0
Passenger load factor (%) 79 80.2 82.3 82.2
Number of aircraft (at year end) 53 53 60
Notes/sources [60][61]
[62]		 [61][62]
 [60][63]
[61][64]		 [63][64]
[61]

Offices

Virgin America leases 68,000 square feet (6,300 m2) of space at Bay Park Plaza II (formerly known as the Forbes Building), a building at 555 Airport Boulevard in Burlingame, California in the San Francisco Bay Area, owned, leased, and managed by Equity Office.[65] Virgin America occupies suite 500 in the building, which is located across a lagoon from U.S. Highway 101 (Bayshore Freeway).[65][66]

Destinations

As of 2015, Virgin America has planned service to twenty-one destinations in the United States and three in Mexico.[67]

Codeshare agreements

The airline has codeshare agreements with the following airlines:[68]

Fleet

Virgin America Airbus A320-200
Virgin America Airbus A320-200 landing at Los Angeles International Airport

As of June 2015, the Virgin America all Airbus fleet consists of the following aircraft:[69][70]

Virgin America Fleet
Aircraft Total Orders Passengers Notes
F Y+ Y Total
Airbus A319-100
10
—
8
12
99
119
Airbus A320-200
53
—
8
12
129
149
8
12
126
146
Airbus A320neo
—
30
TBA
 Deliveries in 2020-2022
Airbus A321neo
—
10
TBA
 185[71] Deliveries in 2017-2018[72]
Total 63 40

Cabin

Virgin America Economy Class
Virgin America First Class

Inflight entertainment

Virgin America offers dual-class service on all flights it operates. Both cabins feature mood lighting, all seats are equipped with Panasonic Avionics' personal in-flight entertainment system running a customized touch-screen GUI called Red. In July 2010, the Red software had been upgraded to version 2.0 across the entire fleet. This update included new features such as an updated position mapping system (powered by Google Maps), in-flight shopping, and open tab capabilities.[73] [74]

Seating

First Class seats offer 55 inches (1,400 mm) of pitch and are 21 inches (530 mm) wide. The seats feature power-ports, adjustable headrests, a massage function, and various recline controls. Passengers seated in first class receive complimentary meals, refreshments, and alcoholic beverages and receive dedicated airport check-in, security screening, and aircraft boarding. In first class, Red offers free live satellite television, free on-demand movies, free on-demand television programming and a selection of games. The front lavatory is for first class guests only.[75]

Main Cabin Select is Virgin America's premium economy product.[76] It is not a distinct class; instead, the service is located at Main Cabin seats in the exit row and behind the bulkheads. Passengers are offered more conveniences than in normal Main Cabin seats and have 38 inches (970 mm) of seat pitch, 17.7 inches (450 mm) of width and dedicated luggage bins. Like in first class, meals, refreshments and alcoholic beverages are free, as are the premium television channels and movies. Airport check-in, security screening, and aircraft boarding are prioritized over Main Cabin passengers. The lavatories in the back are for all passengers flying in economy, including Main Cabin Select.[76]

Main Cabin seats offer 32 inches (810 mm) of pitch and are 17.7 inches (450 mm) wide with power-ports and adjustable headrests. In Main Cabin, Red offers free live satellite television, pay-per-view on-demand movies and on-demand television shows, a small selection of free games and a larger selection of games for purchase.[75] Passengers can order snacks, meals, and alcoholic beverages from their seats via Red. Flight attendants receive the orders via a tablet computer on the food cart thereby eliminating the traditional food and beverage service.[77]

References

  1. ↑ "IATA - Airline and Airport Code Search". iata.org. Retrieved April 13, 2015.
  2. ↑ "Federal Aviation Administration – Airline Certificate Information – Detail View". Av-info.faa.gov. Retrieved September 18, 2010.
  3. ↑ "JetBlue Announces 2015 Annual Profit". New York: JetBlue Airways Corporation. January 28, 2016. Retrieved June 14, 2016.
  4. ↑ "On the Record: Fred Reid," The San Francisco Chronicle, March 19, 2006.
  5. ↑ Ben Mutzabaugh, USA TODAY (March 5, 2014). "Virgin America eyes focus city at Dallas Love Field". USA TODAY. Retrieved April 3, 2015.
  6. ↑ "About Us". Archived from the original on May 1, 2008. Retrieved August 22, 2008.
  7. ↑ "Virgin America Elevate". Retrieved October 12, 2010.
  8. ↑ Under U.S. law, an air transport certificate can only be held by a "citizen of the United States" 49 U.S.C. § 41102, where "citizen of the United States" can be defined as "a corporation ... of which the president and at least two-thirds of the board of directors and other managing officers are citizens of the United States, which is under the actual control of citizens of the United States, and in which at least 75 percent of the voting interest is owned or controlled by persons that are citizens of the United States" 49 U.S.C. § 40102(a)(15)
  9. ↑ Cirillo, Greg (September 2007). "Virgin Territory—Foreign Ownership of US Airlines". Wiley Rein LLP. AirWorthy: Insights into Current Aviation Legal Issues. Retrieved September 26, 2013.
  10. ↑ "Contact Us - FAQs". custhelp.com. Retrieved April 3, 2015.
  11. ↑ "Virgin America files for IPO. A good time to go public?". Retrieved December 21, 2014.
  12. ↑ "Alaska Air to acquire Virgin America in $4bn deal". BBC News. April 4, 2016. Retrieved April 4, 2016.
  13. ↑ "SFO Lands New Carrier Virgin USA — 1,500 Jobs; Airline Sets Sights On Low-fare Market; Corporate Center To Be Based In N.Y.," The San Francisco Chronicle, June 5, 2004.
  14. ↑ "Start Of Virgin America Delayed; Branson's Airline Apparently Needs More Investors," The San Francisco Chronicle, April 9, 2005.
  15. ↑ "Taking To The Air: Low-fare Startup Virgin America Says It Has The Funding To fly," The San Francisco Chronicle, December 9, 2005.
  16. ↑ See "Virgin America Inc. - Certificate - Interstate Scheduled Air Transportation", U.S. DOT Docket OST-2005-23307.
  17. ↑ "Virgin America gets the no-go," The San Francisco Chronicle, December 28, 2006.
  18. ↑ "Virgin Group makes concessions to get Virgin America flying," Air Transport World, January 19, 2007.
  19. ↑ Aviation Week and Space Technology, January 22, 2007, p. 16.
  20. ↑ "United States Department of Transportation ruling" (PDF).
  21. ↑ "Virgin America fights to keep CEO Reid," Air Transport World, April 12, 2007.
  22. ↑ Aviation Week and Space Technology, September 17, 2007, p. 24
  23. ↑ "Virgin America Appoints C. David Cush as Chief Executive Officer". Yahoo. November 26, 2007. Archived from the original on December 22, 2007. Retrieved November 26, 2007.
  24. ↑ Young, Eric (February 2, 2009). "Virgin America has lost $270M". San Francisco Business Times. Retrieved February 3, 2009.
  25. ↑ "Virgin America Reports Third Quarter 2010 Financial Results" (Press release). PR Newswire. November 9, 2010. Retrieved December 8, 2010.
  26. ↑ Prada, Paulo (March 9, 2009). "U.S. Investors Sell Virgin America Stakes". Wall Street Journal. Retrieved March 10, 2009.
  27. ↑ "Report: Virgin America loses U.S. investors". Bizjournals. March 11, 2009. Retrieved March 11, 2009.
  28. ↑ "Virgin America proves it is U.S.-controlled". The Examiner. San Francisco. Bloomberg News. March 12, 2009. Archived from the original on March 15, 2009. Retrieved September 26, 2009.
  29. ↑ . March 11, 2009 http://cbs5.com/video/?id=47391@kpix.dayport.com. Retrieved March 11, 2009. Missing or empty |title= (help)
  30. ↑ "Virgin America says it remains US 'citizen'". International Herald Tribune. March 12, 2009. Retrieved March 12, 2009.
  31. ↑ "Press Releases". Virgin America. May 20, 2009. Retrieved February 4, 2011.
  32. ↑ Reardon, Marguerite. "Free Wi-Fi for the holidays on Virgin America | Signal Strength". CNET News. Retrieved February 4, 2011.
  33. ↑ "Virgin America Becomes First Airline To Offer Gogo's Faster ATG-4 Inflight WiFi Service Fleetwide" (Press release). PR Newswire. December 16, 2014. Retrieved December 20, 2014.
  34. ↑ Shu, Les (December 17, 2014). "Virgin America completes rollout of faster Gogo ATG-4 Wi-Fi across fleet". "Digital Trends". Retrieved December 20, 2014.
  35. ↑ "Virgin America Launches 2010 Growth Plans; Summer Expansion to Orlando, Toronto". EmpireStateFX. March 18, 2010. Archived from the original on March 22, 2010.
  36. ↑ "Granted exemption for scheduled air transportation between United States and Canada". Department of Transportation. April 2, 2010.
  37. ↑ "Virgin America Goes International: California's Airline Toasts New Toronto Flights, Sets Sight on Next Routes" (Press release). Virgin America. June 29, 2010.
  38. ↑ "Virgin America to drop Toronto, shift flights to Dallas". USA Today. January 25, 2011. Archived from the original on June 24, 2012.
  39. ↑ "Virgin America agrees to changes to ensure U.S. citizenship". Boeing and Aerospace News. Seattle Post-Intelligencer. January 8, 2010.
  40. ↑ "Virgin America Confirms Order for 60 New Aircraft" (Press release). Virgin America. January 17, 2011.
  41. ↑ "Virgin America Welcomes First Commercial Travelers to its New Terminal 2 Home" (Press release). Virgin America. April 14, 2011.
  42. ↑ "SFO T2 Ready for Business!" (Press release). San Francisco International Airport. March 17, 2011.
  43. ↑ "Virgin America Reservation Changeover Creates Bumpy Ride". The Wall Street Journal. November 5, 2011.
  44. ↑ "Virgin America Loft at LAX Virgin America launches first domestic lounge". eTurboNews. December 13, 2012.
  45. ↑ "See how Southwest and Virgin America did at Love Field with Wright Amendment gone". Dallas Business Journal. December 1, 2014.
  46. ↑ "Ad of the Day: Virgin America's 6-Hour Preroll Ad Is Creepy, Warholian and Sort of Brilliant". AdWeek. October 15, 2014.
  47. ↑ "Virgin America shares surge on US stock market debut". BBC News. November 14, 2014. Retrieved November 16, 2014.
  48. ↑ "Virgin America Weighs Sale After Receiving Interest". Bloomberg. March 23, 2016. Retrieved April 4, 2016.
  49. ↑ "Smaller Airlines Looking to Expand With Virgin America Acquisition". Wall street journal. April 1, 2016.
  50. ↑ "Alaska Air Group to Acquire Virgin America, Creating West Coast's Premier Carrier" (Press release). Alaska Air Group. April 4, 2016.
  51. ↑ "Alaska Air buys Virgin America for $2.6 billion". CNNMoney. April 4, 2016.
  52. ↑ "The fierce battle for Virgin America". flightglobal. April 26, 2016.
  53. ↑ "Creating the Premier West Coast Airline". Flying Better Together. Alaska Air Group.
  54. ↑ "What You Should Know About the Virgin America, Alaska Air Merger". ABC news. April 4, 2016.
  55. ↑ "Alaska Air says Virgin America may be required to pay termination fee equal to $78.5 mln". Reuters. April 4, 2016.
  56. ↑ "Alaska Airlines CEO says he might keep Virgin America brand". Los Angeles Times. June 15, 2016. Retrieved June 16, 2016.
  57. ↑ "Alaska names execs to run Virgin unit after acquisition". The Seattle Times. July 13, 2016. Retrieved July 16, 2016.
  58. ↑ Boyle, Alan (July 26, 2016). "Virgin America shareholders OK Alaska Air merger, bringing deal closer to completion". GeekWire. Retrieved August 11, 2016.
  59. ↑ "Lawsuit aims to prevent Alaska Airlines-Virgin America deal". September 8, 2016.
  60. 1 2 "Virgin America reports fourth quarter and full year 2013 profits". March 26, 2014. Retrieved March 10, 2016.
  61. 1 2 3 4 "US Department of Transportation - Airline Employment Data by Month". January 2016. Retrieved March 10, 2016.
  62. 1 2 "Virgin America reports fourth quarter and full year 2014 earnings". 218 February 2015. Retrieved March 10, 2016. Check date values in: |date= (help)
  63. 1 2 "Virgin America reports December 2015 Operational Results". February 2016. Retrieved March 8, 2016.
  64. 1 2 "Virgin America posts $340.5 million net profit in 2015". February 18, 2016. Retrieved March 8, 2016.
  65. 1 2 Simmers, Tim. "Virgin America airline destined for Burlingame." Oakland Tribune. January 13, 2006.
  66. ↑ "Virgin America is teaming with Virgin Galactic." Virgin America. Retrieved September 24, 2008. Archived May 12, 2015, at the Wayback Machine.
  67. ↑ "Virgin America Airport Destinations". Retrieved September 16, 2015.
  68. ↑ "Profile on Virgin America". CAPA. Centre for Aviation. Archived from the original on 2016-10-31. Retrieved 2016-10-31.
  69. ↑ "Virgin America Fleet Details and History". Planespotters.net. January 19, 2012. Retrieved January 20, 2012.
  70. ↑ "FARNBOROUGH: Virgin America signs MoU for up to 60 A320s". Flightglobal.com. July 22, 2010. Retrieved July 22, 2010.
  71. ↑ "The Future is Neo-w".
  72. ↑ http://www.cbs8.com/story/30753894/the-future-is-neo-w-virgin-america-to-acquire-10-new-airbus-a321neos
  73. ↑ "VIRGIN AMERICA UPGRADES RED IN–FLIGHT ENTERTAINMENT PLATFORM:" (Flash). Retrieved August 3, 2010.
  74. ↑ Yamshon, Leah (September 13, 2011). "Virgin America's Techie In-Flight Entertainment System". PCWorld. Retrieved May 17, 2012.
  75. 1 2 "Virgin America-Our Difference" (Flash). Retrieved December 8, 2008.
  76. 1 2 "Virgin America Rolls Out Main Cabin Select And Refundable Fares". October 6, 2008. Retrieved December 8, 2008.
  77. ↑ "Eat Better. Eat Onboard." Virgin America. Retrieved on December 8, 2008.

Further reading

External links

Media related to Virgin America at Wikimedia Commons

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