Virgin America Wants More Than Love Field
SAN FRANCISCO (TheStreet) -- Virgin America's seventh year could be a defining one, as the carrier -- recently grown into profitability -- seeks new routes in key aviation markets and also looks to an initial public offering by the end of 2014.
As for the IPO, "we are watching the markets," said Virgin America CEO David Cush, in an interview. "They're a little bit choppy, which bodes well for waiting until they're in good shape. We think the company will be ready later this year."
In the third quarter, Virgin reported net income of $33.5 million, an operating margin of 11.5% and revenue per available seat mile growth of 9.4%, highest in the industry. Fourth-quarter results will be announced this month. Why the late reporting? "We are last in line with Ernst & Young," Cush said. "They do the public ones first."
By next year, that could be a problem Virgin no longer has.
The IPO could conceivably come as Virgin ramps up service at three new airports, all made available by the divestitures required in the merger of American Airlines
The expansion plans mark the first time Virgin would offer flights not involving LAX and its hub at San Francisco International, with the exception of a JFK-Las Vegas flight.
The new airports represent one big chess game for Virgin. Right now, Southwest
Virgin America can make a compelling case to the Justice Department that only it can fulfill the dream of having a new entrant low-fare carrier at all three airports. But American, which will sell its Love gates, and Dallas officials will also play a role in selecting the new Love occupants.
Cush told TheStreet that if Virgin America does not get the Love gates, it would not use its new National and LaGuardia gates to serve Dallas-Fort Worth International Airport, its current home in Dallas. It will move operations to Love Field if it gets the gates. But "if things don't work out at Love, plenty of other airports would like service," he said. He would not specify what alternatives he is considering.
Aviation consultant Robert Mann said he anticipates the Justice Department would likely choose to award the gates to Virgin, creating a story line involving "a brash new entrant upstart at DCA and Love Field -- that makes it a win-win-win for them." Love Field "is not going to get bigger," he said. "You do something now or not have an opportunity to do it again."