Wed, Nov 26, 2008
Economy Has Cut Back Airline's Growth, Profitability
Forecasts
Fuel prices have recently plummeted
to levels not seen in over three years... but if the record high
prices seen this summer are any indication, they won't stay there
for long. That's why a number of airlines are now looking to shore
up their fuel hedges.
Virgin America CEO David Cush told Reuters last weekend current
oil prices present a "unique opportunity" for the relatively new
carrier to hedge its fuel prices for the next four years.
"We see a pretty unique opportunity with what's going on in the
fuel markets right now to go in and lock in some long positions,"
Cush said. "I would imagine over the course of the next several
weeks that we will be going out two and three, and perhaps even
four, years into the fuel market and locking in some of the prices
that are there today."
Virgin America -- which is partly owned by Sir Richard Branson's
Virgin Group -- began service in August 2007, following several
months of negotiations with the Department of Transportation. The
DOT initially balked at issuing an operating certificate to the
upstart low-cost carrier, over foreign ownership issues.
Since then, the airline has carved out a niche market as
something of an upscale JetBlue... offering passengers leather
seats and inflight entertainment systems at relatively cheap ticket
prices.
During a November 22 flight demonstrating the carrier's upcoming
inflight Wi-Fi system, Cush told the news service Virgin America
has enough funds to last three years in the current economy...
which has also conspired to push off the airline's first profitable
year.
"Our view way back was 2010 would be a break-even year or a
profit year. And I still think we have a shot at that," Cush said.
"But given what's going on with the economy, it could push it back
to 2011."
The economic slump has also pared back Virgin's plans to grow
the airline. Cush said Virgin America will keep its current
28-plane fleet of Airbus narrowbodies for as long as two years.
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