Friday, 22 July 2011

Interview: David Cush, Virgin America CEO

Virgin America tempers 2012/13 delivery schedule over fuel concerns

Virgin America will consider postponing up to 13 Airbus A320 deliveries previously slated for the latter half of 2012 and the first half of 2013, CEO David Cush has told this news service. The US low cost carrier, which has rapidly expanded its fleet to 39 jets since launching in 2007, is “still in a growth trajectory” and remains on-track to reach 111 aircraft by 2019, Cush said.

“We have significant flexibility on the size of our fleet over the next 24 months,” the CEO told Aviation Exchange. “We have not entered into agreements for aircraft that had been contemplated for the second half of 2012 [six jets] and first half of 2013 [seven jets] and, therefore, have the fleet size flexibility necessary to make adjustments.”

Cush blamed high oil prices for the possible deferrals, adding that the airline would consider switching to an all neo fleet if fuel costs fail to come down. Virgin America will be the launch customer for the A320neo when it enters service in 2016, and half of the 60 jets it placed on firm order with Airbus in January will be the new, fuel-efficient variant.

“Our initial strategy when launching Virgin America was to finance with ten to 12 year operating leases, so we do have flexibility five or six years down the road to replace our existing fleet with neo aircraft if the economics make sense to do so at that time,” he said. “We have not made those decisions yet, but we are eager to see the benefits of the neo in action.

“Our current young all-A320 family fleet is about 25% more fuel efficient than other domestic fleets, so we already have an advantage, but the neo offers a further 15% in efficiency gains.”

Virgin America has closed financing agreements for the seven aircraft due to arrive in the remainder of 2011, four of which will be leased from Dutch lessor Aercap, in addition to the seven delivering in the first half of 2012. The possible deferrals slated for the next 24 months mean that its targeted fleet size of 70 by year-end 2013 could be reduced to 57, or potentially even 53 pending a decision over the four additional jets earmarked for the latter half of 2013.

Nonetheless, Cush stressed that oil prices are a concern for all airlines, and he described Virgin America’s expansion as “almost unprecedented” in the domestic US market.

“We are very focused on growth as a still young and expanding airline,” he continued. “We need to grow in order to achieve the scale we need to succeed, but the pace of that growth is critical – especially in a fuel and economic environment like this one. We’re navigating that challenge now, and we’re pleased that we’re continuing to see incredibly strong demand in the US for our product, and our revenue performance continues to beat our expectations.”

Virgin America has in recent weeks won two awards for product quality – Travel and Leisure’s Best Domestic Airline award, scooped for the fourth year in a row, and the World Airline Awards for Best Low Cost Carrier in America. “Proof [of our success] will be if we can continue to expand and move toward consistent profitability – while still keeping consumers happy and winning all the major awards for quality,” Cush concluded.