This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Virgin America’s Final Push Into Airline Club Brings Raid on Southwest's Home

Stocks in this article: LUV UAL

SAN FRANCISCO ( TheStreet) -- Now everything is happening at once for Virgin America. New routes, new airports, an initial public offering and the first union on the property are all coming nearly simultaneously, providing a major test for management just as investors start to take notice.

It has been a steep climb for an airline that started out in 2007 after an 18-month battle with the entire U.S. airline industry, which resisted the start-up effort, citing lack of clarity about Englishman Richard Branson's ownership and the potential violation of the limitations on foreign ownership of U.S. carriers.

Read More: American Airlines and Envoy Pilots Try Again on Contract Talks 

Now Virgin America is nearly a full member of the club, one that competes at its San Francisco hub with United (UAL)  and will soon fly out of Southwest's (LUV)  nearly private home airport at Love Field in Dallas.

While its network may be lacking, Virgin America has lower costs than either competitor. Its second-quarter cost per available seat mile excluding fuel and special charges was 6.87 cents, compared with 9.31 cents at United and 7.77 cents at Southwest. Quarterly revenue was $399 million, compared with $9 billion at United and $5 billion at Southwest.

Read More: Boeing, Airbus Get Nods at China Southern; China Made C190 Gets a Maybe

Virgin American occupies a niche as a hip, technologically advanced San Francisco-based carrier with leather seats, Wi-Fi at each of them, mood lighting and advanced in-flight entertainment. "The brand is a good brand, (popular) in high income urban markets where product is important" said CEO David Cush in a 2013 interview with TheStreet.

Virgin America "has clearly built a product that's attractive to customers, who are willing to pay more for it," said Imperial Capital analyst Bob McAdoo.

In trans-continental markets, which account for two-thirds of capacity and two-thirds of the profits, "their product is so different and so modern that it attracts customers who are willing to pay as much for these flights as the legacy carriers get, even though these guys don't have a frequent flier plan that is anything at all like legacy carriers have, or any of the other network advantages," he said.

Yet in the LAX-JFK market, the No. 1 domestic market, "their average ticket price is meaningfully above Delta (DAL) and JetBlue (JBLU) and very close to American (AAL) ," he said.

A recent survey, conducted for TheStreet by GfK, showed that only 5% of Americans consider getting frequent flier miles to be an important consideration when selecting a flight. 

This summer, the LAX-JFK market had approximately 40 daily round-trip flights per day, most of them on five airlines. Virgin America tied United for second in fare level during the first quarter, according to the most recent statistics available from the U.S. Department of Transportation.

American collected an average one-way fare of $310. United and Virgin American collected $255; Delta $239 and Jet Blue $198 -- explaining JetBlue's need to add an improved Mint product.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs