Virgin America Inc. Earnings Soar as Energy Prices Crash

By Markets Fool.com

Image Source: Virgin America.

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Virgin Americareported fourth-quarter results on Feb. 18. The airline's profits surged, as lower fuel costs more than offset cheaper fares.

Virgin America results: The raw numbers

Metric

Q4 2015

Q4 2014

Growth (YOY)

Revenue

$391.465 million

$372.198 million

5%

Adjusted Operating Income

$56.476 million

$34.223 million

65%

Adjusted Net Income

$53.586 million

$28.138 million

90%

Data source: Virgin America Q4 2015 earnings press release.

What happened with Virgin America this quarter?
Available seat miles for the fourth quarter increased 10.3% compared to the prior-year period, with Virgin Americaending the quarter with 58 Airbus A320-family aircraft, up from 53 aircraft at the end of Q4 2014.

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Passenger revenue per available seat mile, or PRASM, decreased 5.1% year over year to10.36 cents, driven by a 5% decrease in yield (average fare paid per mile per passenger) to 12.78 cents per passenger mile. Total RASM decreased 4.7% year over year to 11.66 cents.

Total cost per available seat mile, or CASM, excluding special items, declined 10.1% compared to Q4 2014, to9.98 cents. Virgin America benefited from a nearly 40% drop in fuel costs, which was partially offset by increases in compensation expenses and aircraft maintenance costs.

The lower costs also boosted adjusted operating income, which jumped 65% to $56.5 million, as operating margin improved 5.2 percentage points to 14.4%.

Additionally, Virgin America continues to generate strong operating cash flow, which totaled $23.8 million in the fourth quarter, and more than $197 million for 2015.

What management had to say
"Virgin Americahad a very successful 2015," saidCEO David Cush in a press release.

We achieved the highest net income in company history, generated significant operating cash flow, continued to outperform the industry in domestic unit revenue growth and began growing the airline again. All the while,Virgin Americacontinued to win awards, including being recognized as the 'Best U.S. Airline' in the prestigious annualConde Nast Traveler'sReaders' Choice Awards for the eighth consecutive year.

Looking forward
Management issued a first-quarter forecast, including:

  • Available seat miles to increase by 14% to 16% compared to Q1 2015.
  • PRASM to decrease between 3% and 5% year over year.
  • CASM excluding special items, fuel, and profit sharing to increase between 2% and 3% versus Q1 2015.

"We are excited about our growth opportunities in 2016 as we take delivery of five new Airbus A320 aircraft and continue to enhance our ancillary product offering," said Cush.

The article Virgin America Inc. Earnings Soar as Energy Prices Crash originally appeared on Fool.com.

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Virgin America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.