Virgin America: Financials prove service makes a difference

by Tom Johansmeyer on

We’ve all gotten used to bailing out airlines that can’t figure out how to take care of their paying customers, operate profitably or otherwise get their respective acts together. And, there really isn’t much hope of this situation changing. To be an airline, in general, is to be dysfunctional … until you look at the new entrant, Virgin America. The privately held carrier announced on Friday that its revenue surged 38.3 percent from the third quarter of 2008 to the third quarter of 2009.

The airline has amassed a collection of awards to back up its commitment to customer service, including “Best Domestic Airline” in Travel + Leisure‘s 2009 World’s Best Awards and “Best Business/First Class” among domestic airlines in Condé Nast Traveler‘s 2009 Business Travel Poll. And, the fact that the 1,500-person company is adding jobs in this market — beating both the recession and its worsened form in the travel business — suggests that it is possible for an airline to not just survive but actually succeed.

David Cush, Virgin America’s President and CEO, says, “Despite an uncertain economic climate since our 2007 launch, we’re pleased to report steady and strong financial performance and our first quarterly operating profit.” He adds, “At a time when flyers are more discerning than ever, it is clear that our low fares, award-winning guest service and innovative amenities continue to convert a growing network of loyal travelers. We look forward to bringing our unique value proposition to more travelers as we grow in 2010 and beyond. ”

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But, enough of the soft stuff — let’s turn to the numbers. That’s where you’ll find the truth in these matters. Cost containment and operational efficiency helped Virgin America post a record load factor of 86.6 percent, an increase of 5.2 percentage points year-over-year. Costs per available seat mile were pushed down 33.9 percent (24.4 percent ex-fuel), and operating income swung from a $54 million loss in the third quarter of 2008 to a $5.1 million gain this year. Along the way, Virgin America realized a mishandled baggage rate of 1.18 per thousand — three times better than the industry average. And, it attained an on-time rate of 87.2 percent.

Sorry to go “quant” and dwell on the numbers a bit, but they speak to a common theme here at Gadling: whether the airlines are doomed to fail … and be propped up by the government taxpayers and fail again … and so on. Virgin America’s proved that an airline can amass 1.1 million loyalty program members and fly 5.8 million passengers in just over two years and still find a way to get into the black. There is probably market share gain in this airline’s future, but it is making a big mistake: by not screwing up, it’s taking a pass on all the free money the feds are more than willing to give to an industry that refuses to help itself.

The online travel market moves past pulling the trigger

by Tom Johansmeyer on

If you think you need to sell seats or rooms to be a player in the online travel industry, think again! Travel research firm PhoCusWright found in a new survey that the online travel marketplace has evolved over the past few years to include a wide selection of non-transactional travel sites that serve as “pointers” to those online destinations were eager travelers can melt some plastic. But, the publication of regular content — at sites like Gadling, for example — is where many travel buyers are forming their relationships, leading to the possibility that the strongest online travel brands may not have any selling capabilities (or interests in developing them) at all.

For companies in the business of selling travel online, this opens a new range of considerations, in which relationships with non-transactional content providers have to be managed carefully. After all, the seller wants to cultivate the customer’s loyalty but also wants to ensure a steady stream of traffic from complementary businesses. “Metasearch” sites, like Kayak, which scour several online travel sales sites, are also playing an increasingly important role in the online travel dynamic.

“Before consumers ever hit the ‘book now’ button, they undergo a whole process of gathering, qualifying and comparing travel options,” says Carroll Rheem, director, research at PhoCusWright. “Both metasearch and review sites are designed to help consumers in this often cumbersome decision-making process. Therefore, it is not surprising that the popularity of these types of Web sites has grown significantly over the past several years.”

As of the end of June this year, Kayak was the top met search site on the web, with close to 7 million monthly unique visitors. Rheem observes that Kayak is among “the most exciting brands in the travel space today.” She notes, “We wanted to take a closer look at which elements of their content and functionality consumers are gravitating toward and what impact they have on booking behavior.”

Markets tend to change during periods of upheaval, so look for the next few years to yield a completely different landscape online. The online travel agencies and other sellers will probably become spots for trigger-pullers only, with the relationship being owned further up the travel information supply chain. Travel buyers will form their relationships with sources of information, not sources of inventory.

Open-Skies deal between U.S. and Japan

by Sean McLachlan on

Flying between the United States and Japan is set to become a whole lot easier after the two nations agreed to an Open-Skies deal. The deal hasn’t been formalized yet, but both governments are eager to get rid of restrictions on what airlines can fly where, and how many flights they can operate.

U.S. Transportation Secretary Ray Lahood said, “Once this agreement takes effect, American and Japanese consumers, airlines, and economies will enjoy the benefits of competitive pricing and more convenient service.”

At the moment there’s a cap on the number of flights between the U.S. and Japan, and restrictions on how they’re operated, but those will disappear. Expect some great offers as airlines scramble to get a bigger share of a newly expanded market.

The agreement will cover cargo services too, so with any luck shipping costs will be going down as well.

Once the agreement is finalized, Japan will be the 95th Open-Skies partner with the U.S.

Hawaii’s on sale with cheap flights from United and Hawaiian Airlines

by Katie Hammel on

Winter may not have officially started yet, but it certainly feels like it has. With temps in the double, and even single, digits and snowstorms covering the country, there’s no denying that a tropical vacation sounds pretty darn good right about now. Luckily escaping to the warmth of Hawaii this winter will be surprisingly cheap thanks to two great airfare sales.

Book a ticket through the Hawaiian Airlines sale by December 16 for travel January 5 to March 11 and April 6 to June 10 and you could fly for as little as $288 round trip (plus taxes). Seattle or Portland to Honolulu, and Portland to Maui are the cheapest routes at $288 round trip. Los Angeles and San Francisco to Honolulu are $368 and Seattle to Maui is $318.

Rates are even lower through United’s sale, which ends a day earlier on Dec 15. The travel dates are more limited – just January 12 to March 4 – but there is a wider variety of cities to choose from. For example, Chicago to Maui is $302, LA to Honolulu is $261, San Francisco to Kona is $265, and Denver to Maui is $285.
And if you need a reason to go to Hawaii this winter (other than “it’s warm there!”) Hawaiian Airlines offers a few more. January to April is whale watching season, now is the perfect time for surfers to catch huge waves formed by storms, and in February there are several Chinese New Year celebrations and the Big Island’s Waimea Cherry Blossom Festival. Plus, did I mention, it’s warm there?

If you can’t afford the flight, check out Portland International Airport’s website by January 2 and enter to win a pair of tickets from Portland to Maui. Okay, actually you can choose Maui or Chicago, but let’s be real – you’ll choose Maui.

Times Square becomes shooting gallery

by Tom Johansmeyer on

If you were leaving the Marriott Marquis in Manhattan on Thursday morning,what you saw was not a movie. A plainclothes police officer shot a 25-year-old man; the shot was fatal. But, before going down, the Bronx resident, who was not identified, fired first with a semiautomatic Mac-10. The gunfight broke out over whether the gunman was a scammer, writing tourists’ names on CDs and using that to pressure them into buying.

The bullets flew over Broadway, quite literally, at 11:15 AM. The streets were packed with tourists and shoppers, which is the norm in Times Square on a weekday in December. The police officer involved, who’s been on the force for 17 years, is assigned to enforce street vendor regulations. He saw two people he suspected of a specific scam: (1) approach a tourist, (2)ask for his name, (3) write the name on a CD and (4) demand $10 for the “service.”

Though nobody — except the gunman, of course — was reported to have been hurt, but the situation could have been pretty severe. There were 27 rounds of ammo in the Mac-10. He only got three shots off before a shattered bullet caused the weapon to misfire.

Doubtless, an event like this is bound to reach a first-time visitor to the city … such as Suzanne Davis from Australia: “It’s my first day in New York, so it makes very real what you see in the movies.”

[Photo by Stewart via Flickr]