Virgin America to cut capacity in Q1 2013

Washington DC
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Low-cost carrier Virgin America is reducing capacity by about 3.5% in the first quarter of 2013 and offering voluntary short-term leave to some staff, as a result of forecasted weaker demand.

The privately-owned five-year-old carrier, however, is expecting a profitable third and fourth quarter this year, says its chief executive David Cush in a recent letter to employees.

The capacity cuts and staff leave were stated in the 10 October letter to employees by Cush. A Virgin America spokeswoman says the 3.5% cut in available seat miles is "in line with what much of the rest of the industry is doing in response to forecast demand". The capacity cuts will be in the form of frequency reductions, and the airline does not plan to drop destinations, she adds.

"We will be ramping the schedule back up for the second quarter. Until now, we have never been of a size where we could manage and adjust our network seasonally; we now have a network of a size that can be - and may occasionally need to be - pulled back in response to seasonal demand fluctuations, just as most of our competitors do," she says.

The airline has also offered short-term voluntary leave and flexible-time options for "some workgroups which will meet the needs of these modest schedule adjustments", says the spokeswoman.

Cush said in his letter to employees that the third quarter will be "profitable" and there are "indications that the fourth quarter will also be profitable...even with current fuel prices."

Virgin America narrowed its operating loss to $4.08 million in the second quarter, and posted an operating loss of $49 million in the first quarter. Cush said in August the airline expects its first full-year operating profit in 2012. The airline's spokeswoman could not comment on whether this forecast still stands, but says: "As we enter a planned slower growth phase, our financing is secure, our cash position is solid, our markets continue to mature into profitability and our product keeps hitting the mark with consumers."