Image Source: Virgin America.
Virgin America reported first-quarter results on Thursday, delivering sharply higher profits ahead of its proposed merger with Alaska Air Group .
Virgin America results: The raw numbers
Adjusted Net Income
Source: Virgin America Q1 2016 earnings press release .
What happened with Virgin America this quarter?
Available seat miles for the first quarter increased 15.8% compared to the prior-year period, with Virgin America ending the quarter with 58 Airbus A320-family aircraft in service, up from 53 aircraft at the end of Q1 2015.
Passenger revenue per available seat mile, or PRASM, decreased 3.8% year over year to 9.88 cents, driven by a 3.7% decrease in yield (average fare paid per mile per passenger) to 12.34 cents per passenger mile. Total RASM decreased 3.7% year over year to 11.15 cents.
Total cost per available seat mile, or CASM (excluding special items) declined 8.8% compared to Q1 2015 to 10.13 cents, primarily due to a 35.9% drop in fuel costs.
Those lower jet fuel prices helped adjusted operating income soar 152.8% to $33.2 million, with operating margin improving 5.1 percentage points to 9.1%.
All told, adjusted net income surged 74.5% to $18.4 million, and 70.8% on a per-share basis to $0.41.
What management had to say
"Virgin America performed exceptionally well as we entered 2016," said CEO David Cush in a press release. "We reported record first quarter net income driven by continued unit revenue outperformance as compared with the domestic industry and the benefit of lower fuel costs. Importantly, we achieved these results with capacity growth of nearly 16 percent in the first quarter while also maintaining our focus on non-fuel unit costs."
Due to its proposed merger with Alaska Air Group, Virgin America said that it would no longer be providing forward guidance. The company also declined to provide any information in regard to the timing of the closing of the transaction with Alaska Air Group. Cush did, however, take time to highlight Virgin America's success during the company's conference call.
Before Virgin America started operating, the flying experience was dismal. ... Today, in large part [due] to Virgin America, we believe things have changed. We've shown the industry the notion that you either have to be a legacy carrier with a legacy cost structure and legacy fares or you can be a no-frills low-cost carrier, but that's a false choice. We've shown that you can provide a premium product and experience, and that you can create an airline people actually want to fly and provide that experience at lower fares than the other guys offer and basically by running a highly efficient operation, which we have done.
Cush went on to say that Alaska Airlines has similarly reduced its cost structure and invested in its services.
"We look forward to joining forces with them to bring more high-quality, low-fare service to more markets across North America," he said.
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The article Virgin America Inc. Earnings Soar Ahead of Deal With Alaska Air Group originally appeared on Fool.com.
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