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Virgin America

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Virgin America
Vx-logo.svg
IATA ICAO Callsign
VX[1] VRD REDWOOD
Founded January 1, 2004
Commenced operations August 8, 2007
AOC # VQIA199L[2]
Hubs
Focus cities
Frequent-flyer program Elevate
Fleet size 65
Destinations 24
Company slogan A Breath of Fresh Airline
Parent company Alaska Air Group
Headquarters Burlingame, California
Key people
Revenue Increase US$ 1.529 billion (2015)
Operating income Increase US$ 177.2 million (2015)
Net income Increase US$ 340.5 million (2015)[3]
Website virginamerica.com

Virgin America Inc. is an American airline that was founded in 2004 and began operations in 2007. Headquartered in Burlingame, California in the San Francisco Bay Area, with San Francisco International Airport as its main hub, Virgin America is a brand that was created by the British Virgin Group as an American counterpart to the corporation's other airlines.[4] The airline flies between major metropolitan cities on the Eastern and West Coast seaboards.[5] Virgin America's frequent flyer program Elevate provides award flights and other benefits to frequent fliers.[6]

Alaska Air Group acquired Virgin America in 2016, at a valuation of $2.6 billion, with additional expenses bringing the cost to approximately $4 billion.[7] With the transaction, Virgin America became a sister carrier to the other Alaska Air Group subsidiaries Alaska Airlines and Horizon Air.[8] Alaska Air Group is set to integrate Virgin America into Alaska Airlines, with a single operating certificate expected to be produced in 2019.[9]

History[edit]

Early development and setbacks (2004–2007)[edit]

In early 2004, Virgin Group announced its intention to found a United States-based, low-fare airline called "Virgin USA", at the time, Virgin USA expected flights to begin by mid-2005. After considering several key areas, the San Francisco Bay Area was chosen as the location of its flight operations center and later as its corporate headquarters,[4] the airline changed its name from "Virgin USA" to "Virgin America" and due to the difficulty in finding U.S. investors willing to gamble on a new airline in an already congested industry, the launch date was pushed back from mid-2005 to early 2006.[10]

Virgin America secured U.S. investors Black Canyon Capital and Cyrus Capital Partners in late 2005.[11] Once the new owners were on board, Virgin’s General Counsel submitted the required U.S. Department of Transportation certificate application on December 9, 2005.[12] Unfortunately, despite significant public support for the new California-based airline, the approval process was mired with debate between the support and opposition of the new airline. City and state representatives from California and New York led the support for the airline, while the biggest opposition came from a national aviation labor union, Air Line Pilots Association, as well as the pre-existing Houston, Texas-based competitor Continental Airlines. The review of Virgin America's application was prolonged due to this opposition, which claimed Virgin America, being a subsidiary of the United Kingdom-based Virgin Group, would not be under U.S. ownership or control. The application was initially denied by the Department of Transportation on December 27, 2006.[13]

In order to achieve the necessary approval, Virgin America's General Counsel David Pflieger and CEO Fred Reid filed a revised application that proposed a restructuring of the airline in January 2007; voting shares would be held by a Department of Transportation-approved trust and only two Virgin Group directors would be on the eight-person board. Additionally, Virgin America was open to removing Richard Branson from the airline's board of directors and possibly removing the "Virgin" brand from the title altogether.[14] Virgin America was tentatively cleared to fly by the U.S. Department of Transportation on March 20, 2007, on the condition that the airline would alter its business structure, including the limitation of foreign ownership shares to 25% and the replacement of Fred Reid,[15] the airline protested the stipulation concerning Reid's removal to the federal regulators, arguing that the other stipulations ensured that the business would not be ruled by foreign interests.[16] The Department of Transportation's final agreement was to allow Reid to remain involved with Virgin America until February 2008, after which he was required to leave the company.[17]

Virgin Group operations (2007–2016)[edit]

"Air Colbert", the aircraft used on Virgin America's inaugural flight, on the ground at Seattle–Tacoma International Airport

Virgin America began selling tickets in July 2007, on August 8, 2007 the airline made its inaugural New York and Los Angeles to San Francisco flights — the aircraft was named "Air Colbert", after comedian Stephen Colbert and "California Dreaming".[18] In December 2007, C. David Cush replaced Reid as CEO of the airline.[19] From the beginning of operations, Virgin America reported losses, beginning with $270 million in its first month, until the third quarter of 2010, when it achieved its first profit of $7.5 million.[20][17]

On May 21, 2009, Virgin America became the first U.S. airline to offer Wi-Fi access via Gogo Inflight Internet on every flight.[21] Between November 10, 2009, and January 15, 2010, the airline offered free WiFi with a subsidy from Google,[22] on December 17, 2014, Virgin America announced that it would be offering faster fleet-wide ATG-4 inflight WiFi service from Gogo, with speeds three times faster than the first generation system.[23]

Virgin America's check-in area at Chicago O'Hare.

In March 2010, Virgin America announced its intention to start flying to Toronto from Los Angeles and San Francisco, making it the airline's first international destination.[24] Following the Department of Transportation's approval of Virgin America's proposal to fly to Canada, international service began on June 29, 2010.[25] However, due to high operating costs and higher demand for Dallas/Fort-Worth, Virgin America terminated Toronto service on April 6, 2011.[26] Virgin America began its service to Dallas/Fort Worth International Airport in December 2010, and continued until after the repeal of the Wright Amendment in October 2014, which prompted the airline to establish a focus city at the Dallas Love Field and enhance the number of connecting destinations. As a result, Virgin America transported almost 31,000 passengers through Dallas Love Field in the first month, achieving 3.58% market share at Dallas Love Field.[27]

Virgin America announced in January 2011 a firm order for sixty new Airbus A320 aircraft, including thirty new Airbus A320neos, that would be delivered starting in 2016, as a formal expansion of an initial commitment made by Richard Branson at the Farnborough Airshow in July 2010.[28] In April 2011, Virgin America's hub at San Francisco International Airport relocated to the newly remodeled Terminal 2, sharing the gates with American Airlines;[29] in late October 2011, the airline migrated to Sabre's global distribution system (GDS) that handles reservations, frequent-flier accounts, flight operations data and crew scheduling. Difficulties with the changeover sparked widespread customer complaints, due to early technical malfunctions surrounding the program,[30] on December 12, 2012, Virgin America opened their first airport lounge, the Virgin America Loft, at Los Angeles International Airport.[31] Virgin America had its first public offering at the NASDAQ stock exchange on November 14, 2014, selling 13.3M shares to raise $307 million for the company.[32]

The Virgin America exhibit at the Frontiers of Flight Museum at Dallas Love Field

Alaska Airlines merger (2016–present)[edit]

A number of airlines interested in a takeover of Virgin America approached the airline in late 2015, prompting Virgin America to correspond with an undisclosed financial adviser about how and if to proceed with a sale.[33] Alaska Air Group and JetBlue Airways were the two most interested companies to make offers to purchase the airline from Virgin Group.[34] In December 2015, Alaska was interested at $44.75 per share, before JetBlue manifested its interest in February 2016. A bidding war ensued culminating on March 31 and April 1 at $57 per share, 47% higher than the day's closure at $38.9.[35] On April 4, 2016, Alaska Air Group announced that it had agreed to buy Virgin America for $2.6 billion. Including debt and aircraft leases, the transaction was worth approximately $4 billion.[7] Had the merger agreement been terminated by Virgin America, they would have been contractually obligated to pay Alaska Air Group a termination fee equal to $78.5 million.[36]

Virgin America's founder Richard Branson expressed disappointment with the merger between Alaska Airlines and the airline he founded;[37] in July 2016, Virgin America's shareholders approved the merger, leaving the approval by the United States Department of Justice as the only foreseeable hurdle.[38] In September 2016, a lawsuit was filed against Alaska Airlines by consumers to block the merger between the two carriers, which the Alaska Air Group settled in court in December 2016.[39] Subsequently, the Department of Justice approved the merger, which was completed on December 14.[8] Following the acquisition, the former chief financial officer of Alaska Airlines, Peter Hunt, became the president of Virgin America, while the former chief operating officer and president of Alaska Airlines, Ben Minicucci, became the chief executive officer.[40]

Virgin America was scheduled to be and became the launch customer for the Airbus A321neo, with the airline placing a firm order for 10 aircraft through leasing company GE Capital Aviation Services, the first A321neo was delivered in Hamburg to Virgin America and entered service on May 31, 2017; a total of five A321neos would be delivered to Virgin in 2017 and five in 2018 if Alaska Airlines decided to maintain an Airbus fleet.[41] In early February 2017, Alaska Air Group said it was working with GE on an arrangement where it would not take delivery of all 10 ordered jets, in favor of keeping a predominantly Boeing fleet.[42] A presentation given by Alaska Airlines' chief financial officer in March 2017 indicated that Alaska would take delivery of all 10 leased A321neos, and would absorb and operate Virgin America's existing A319 and A320 fleet through at least 2024.[43]

On March 22, 2017, the Alaska Air Group announced that the Virgin America brand would be retired "sometime in 2019." As part of the merger, some of Virgin's amenities will be integrated into Alaska's product.[9] As Alaska Group is licensing the Virgin brand from Virgin Group, Branson indicated a willingness to relaunch the airline after the Virgin America brand is retired,[44] on October 5, 2017, it was announced that all Virgin America flights will officially become Alaska Airlines flights on April 25, 2018.[45]

Corporate affairs[edit]

Business trends[edit]

The key trends for Virgin America over recent years are shown below (as at year ending December 31):

2012 2013 2014 2015
Turnover (US$ m) 1,323 1,425 1,490 1,530
Net Profits (US$ m) −145.4 10.1 60.1 340.5
Number of employees (full & part-time, year end) 2,509 2,660 2,672 2,911
Number of passengers (m) 6.2 6.3 6.5 7.0
Passenger load factor (%) 79 80.2 82.3 82.2
Number of aircraft (at year end) 53 53 60
Notes/sources [46][47]
[48]
[47][48]
[46][49]
[47][50]
[49][50]
[47]

Offices[edit]

Virgin America leases 68,000 square feet (6,300 m2) of space at Bay Park Plaza II (formerly known as the Forbes Building), a building at 555 Airport Boulevard in Burlingame, California in the San Francisco Bay Area, owned, leased, and managed by Equity Office.[51] Virgin America occupies suite 500 in the building, which is located across a lagoon from U.S. Highway 101 (Bayshore Freeway).[51]

Destinations[edit]

As of January 2017, Virgin America flies to a total of twenty-four destinations, including twenty-one domestic destinations and three destinations in Mexico,[52] its primary hub is located at the San Francisco International Airport, with its secondary hub at Los Angeles International Airport.[4]

Codeshare agreements[edit]

The airline has codeshare agreements with the following airlines:[53][54]

Fleet[edit]

Virgin America Airbus A320-200 landing at Chicago O'Hare
Virgin America Airbus A321neo taxiing at New York-JFK

As of May 2017, the Virgin America all Airbus fleet consists of the following aircraft:[55]

Virgin America Fleet
Aircraft In Service Orders Passengers Notes
F Y+ Y Total
Airbus A319-100 10 8 12 99 119 To be transferred to Alaska Airlines[56]
Airbus A320-200 53 8 12 129 149 To be transferred to Alaska Airlines[56]
8 12 126 146
Airbus A320neo 30 TBA Deliveries in 2020–2022[28]
Orders to be transferred to Alaska Airlines.[56]It remains unclear whether Alaska Airlines will ultimately receive these airframes; it may opt to cancel these orders and revert to an all-Boeing fleet.[57]
Airbus A321neo 2 8 8 18 159 185 Launch customer
Deliveries in 2017–2018[28]
Orders to be transferred to Alaska Airlines.[56]It remains unclear whether Alaska Airlines will ultimately receive these airframes; it may opt to cancel these orders and revert to an all-Boeing fleet.[57]
Total 65 38

Cabin[edit]

Virgin America Economy Class
Virgin America First Class

Inflight entertainment[edit]

Virgin America offers dual-class service on all flights it operates. Both cabins feature mood lighting and all seats are equipped with Panasonic Avionics' personal in-flight entertainment system running a customized touch-screen GUI called Red. In July 2010, the Red software had been upgraded to version 2.0 across the entire fleet. This update included new features such as an updated position mapping system powered by Google Maps, in-flight shopping, and open tab capabilities,[58] the Red system was upgraded again in June 2015, introducing a new seatback touch screen service.[59]

Seating[edit]

First Class seats offer 55 inches (1,400 mm) of pitch and are 21 inches (530 mm) wide. The seats feature power-ports, adjustable headrests, a massage function, and various recline controls. Passengers seated in first class receive complimentary meals, refreshments and alcoholic beverages and receive dedicated airport check-in, security screening, and aircraft boarding; in first class, Red offers free live satellite television, free on-demand movies, free on-demand television programming and a selection of games. The front lavatory is for first class guests only.[60]

Main Cabin Select is Virgin America's premium economy product.[61] It is not a distinct class; instead, on the A319-100 and A320-200, the service is located at Main Cabin seats in the exit row and behind the bulkheads. On their A321neo, the service is located in the first three rows of the Main Cabin. Passengers are offered more conveniences than in normal Main Cabin seats and have 38 inches (970 mm) of seat pitch, 17.7 inches (450 mm) of width and dedicated luggage bins. Like in first class, meals, refreshments and alcoholic beverages are free, as are the premium television channels and movies. Airport check-in, security screening, and aircraft boarding are prioritized over Main Cabin passengers, the lavatories in the back are for all passengers flying in economy, including Main Cabin Select.[61]

Main Cabin seats offer 32 inches (810 mm) of pitch and are 17.7 inches (450 mm) wide with power-ports and adjustable headrests. Following the merger with Alaska Airlines, Red mirrors Alaska's inflight service by offering live satellite television, on-demand movies, on-demand television shows, and a selection of games for free.[61] Furthermore, in addition to the free beverage service, passengers can order more complimentary non-alcoholic beverages, or purchase snacks, meals, and alcoholic beverages from their seats via Red.[61]

References[edit]

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  61. ^ a b c d "Fly With Us". Retrieved August 22, 2017. 

Further reading[edit]

External links[edit]

Media related to Virgin America at Wikimedia Commons