Discount startup Virgin America said Friday that revenue nearly doubled in the first quarter, but the results are unlikely to quell worries from critics that the airline might need a new cash infusion to survive the current economic downturn.
Virgin America said it lost $40.3 million in the quarter, compared to a loss of $52 million during the same three months of 2008, while nearly doubling revenue from last year to $100.8 million. The airline, which was launched in 2007 with the brand of minority-owner Virgin Group Ltd., in a
statement announcing the results said that "despite a challenging economic climate" it "reported improved financial results and steady year-over-year growth."
But perhaps the most glaring number in the report was the $38 million in unrestricted cash that Virgin America had at the end of the quarter. The airline at year's end
said it had $68 million in cash on hand. Simple math says Virgin America needs to cut those losses quick or the airline will not be around much longer.
Virgin America, for its part, said in its statement that it has "full funding for its operation through its projected profitability date." So the airline either expects to burn less in the months to come and turn a profit quickly, or has additional cash on the way.
A new investor appears possible. Virgin America has been
besieged by complaints from competitors who want the Department of Transportation to investigate whether the Virgin Group's ownership exceeds the 25% cap on foreign ownership imposed by U.S. law. The airline's U.S. shareholders, a group that includes Cyrus Capital Partners LP and Black Canyon Capital LLC, according to sources want out. But the firms have agreed to hold their stakes until a buyer can be found so the airline does not run afoul of U.S. law.
Many in the industry have been skeptical that Virgin America would be able to raise new capital given current market conditions. But perhaps there is enough good news in the first quarter to give investors reason for hope, and buy Virgin America more time. --
Lou Whiteman
Lou Whiteman is a senior writer covering the automotive, transportation and industrial sectors. Follow him on Twitter @louwhiteman
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