Virgin America (VA) CEO: It's Time for Us to Grow in San Francisco - TheStreet

NEW YORK (TheStreet) -- Virgin America (VA) CEO David Cush firmly believes it was a good decision to put 12% of the young airline's capacity into Dallas Love Field. But he said next year the airline will make its San Francisco hub the biggest beneficiary from new Airbus A320s that will continue to arrive.

In 2016, "the focus of our growth will be San Francisco," Cush said in an interview. Virgin America will grow capacity about 13% to 14% in 2016, and "I would expect San Francisco to grow faster," Cush said, with the addition of one or two new destinations, which he declined to name. Additionally, SFO to Fort Lauderdale-Hollywood International Airport and SFO to John F. Kennedy International Airport in New York will get more capacity.

San Francisco's 2016 capacity gains will also reflect the planned additions of SFO to Honolulu on Nov. 2, and SFO to Maui on Dec. 3. That will bring the number of Virgin destinations from SFO to 20, with 53 daily departures, rising to 60 daily departures shortly after Thanksgiving.

Virgin America allocates about 50% of its capacity to SFO, where it has about 12% of the domestic market. United is top dog at the airport, where it operates the most successful U.S. trans-Pacific hub.

During Virgin America's third-quarter earnings call on Thursday, Cush noted "Our focus on San Francisco has been beneficial to us. The San Francisco market is probably the strongest corporate market in the United States right now."

By contrast, while Virgin America's overall third-quarter passenger revenue per available seat mile fell 2.7% overall, it fell 19% at Love Field and 5% on trans-continental routes.

Virgin America entered Dallas Love Field in October 2014, moving flights from Dallas-Fort Worth and also boosting capacity. Today, about 12% of capacity is assigned there. It is safe to say that the move has not been entirely positive, although Cush said he continues to see improvement.


The carrier plans to end Dallas-Austin service next month. It launched flights from Love Field to Austin in April, later cutting back to four. Asked in the interview if the carrier made a mistake with the Austin flight, Cush responded: "I wouldn't say Austin was a mistake. It didn't pan out the way we thought it would."

However, he noted that airlines tend to make money in capacity constrained airports such as Love Field and that Virgin flights from Love Field to LaGuardia and Reagan National airports "are tracking to become profitable."

Aviation consultant Bob Mann said Love Field was a mistake for Virgin because "it is absolutely constrained and possession is nine-tenths of the law" and Southwest has possession. "It hasn't worked for Virgin," Mann said.

By contrast, adding capacity in San Francisco "is consistent with what everybody else does," he said. "You play to your strengths. You don't take a flier on markets that {won't} pan out."

Virgin should do in San Francisco what Alaska (ALK) - Get Report does in Seattle, continually adding markets and building its presence, even as Delta builds a competing Seattle hub. "Look at Alaska's return on invested capital and tell me it's a bad strategy," Mann said. "Their numbers are staggering every year."

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.