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Virgin America Losses Narrow

Virgin America targeting a full-year operating profit in 2010

Aug 28, 2009

CHICAGO - Virgin America Inc. said Thursday that it could be profitable by the end of the year as it reported a narrower second-quarter loss Thursday, though the U.S. airline burned through cash as it enters the tougher fall and winter travel season.

The California-based carrier said it had "full funding" to continue, and is targeting a full-year operating profit in 2010.

Virgin America, still embroiled in controversy over its ownership, reported a net loss of $15.8 million in the three months to June 30, compared with a $64.4 million deficit a year earlier. It lost $40.3 million in the first quarter.

Revenue rose by 47% from the prior year's quarter to $135.9 million.

"With continued fuel price volatility it is tough to forecast shorter term, but we had a profitable performance in both July 2009 and June 2009 and hoped-for profitable quarters as early as late 2009," said spokeswoman Abby Lunardini.

The continued losses have raised questions about the airline's future, though average revenue and costs improved substantially over the first quarter of the year.

However, it burned through $10 million of cash during the second quarter to leave its unrestricted balance at $28 million, with total liquidity at $54 million.

The airline's cash cushion trails most peers heading into an uncertain fall travel season for the industry, notably in terms of business traffic.

Virgin America started operations in 2007 after a delay in securing regulatory approval linked to its ownership structure. In order to comply with U.S. law, 75% of the voting stock must be held by American citizens.

The carrier is the creation of British entrepreneur Richard Branson, whose Virgin Group owns 25% of the airline.

Washington-based Alaska Airlines Inc. (ALK), which competes with Virgin America on West Coast routes, has taken up the industry baton in calling the airline's legality into question.

Virgin America has said it complies with the law and that the Department of Transportation is aware of its potential changes. The airline has been seeking alternative investors after two private equity groups that provided the initial capital opted to trigger a sale clause.

The airline has not said whether U.S. investors retained an "economic interest" alongside board representation, which its opponents said was critical to meet the citizenship test.

Virgin America targeting a full-year operating profit in 2010
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Source: Dow Jones Newswires

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