Why an Airline That Travelers Love Is Failing

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Virgin America Handout / AP

Virgin America is the equivalent of a TV show that’s a hit with critics but risks being canceled because of failing to attract enough viewers. The San Francisco–based carrier is regularly voted to the top of “best airline” lists. But it is far from the best in the business at making money.

On its website, Virgin America proudly displays the long list of travel awards it’s won over the past few years — best in-flight entertainment, best cabin staff, best cabin ambience, best overall passenger experience and so on. In the latest Conde Nast Traveler Readers’ Choice survey, it’s no surprise which carrier was named the top overall airline in the U.S. Yep, it’s the child of British billionaire Richard Branson, five-year-old Virgin America.

For the uninitiated, the San Francisco Chronicle offered a portrait of what makes the airline so special:

Boarding a Virgin America flight, bathed in 12 alternating shades of mood lighting and awash in globalized dance/trance music, is not unlike rolling into a late-night club, cocktail in hand. Unlike low-cost carriers that fly with single-class seats and service, Virgin America offers first class, premium economy and economy.

(MORE: Popularity and Pay: Was Willy Loman Right About Being Well Liked?)

Virgin American stands out especially because the industry is dominated with trends pushing for more fees, fewer perks and an overall degrading and deglamorizing of the flying experience. Years ago — O.K., decades ago — it was laughable to compare buses with planes. But nowadays, the concept of a plane being little more than a “bus in the sky” is the industry standard.

It’s fairly remarkable than any airline can generate positive feelings among customers in today’s travel scene. But while Virgin America may be well liked, it may not be well suited to compete.

Reporting in August, the Chronicle noted that, despite all its rewards and glowing reviews, since 2007, Virgin America has posted a net loss of $671 million and an operating loss of $447 million. More recently, Bloomberg News reported that after large net losses in the second quarter of 2012, the airline would be cutting back flights and asking employees to take voluntary work leave in early 2013.

“I’m surprised it has survived this long, given the huge losses accumulated to date,” Scott Hamilton, managing director of aviation-consulting firm Leeham Co., told Skift Travel IQ. “I don’t really see a place in the market for Virgin America.”

(MORE: How Airline Fees Screw Over Travelers Who Don’t Pay Them)

Because Virgin America is young, it doesn’t have a large a network of routes, which is essential to attracting business travelers. And because Virgin America offers a premium product (leather seats, power outlets, fleetwide wi-fi, live TV), its flights often aren’t as cheap as those of competitors like Southwest and Alaska Airlines — and low price is overwhelmingly important to leisure travelers. Speaking of competitors, they have regularly jumped into markets where Virgin America is operating, making it difficult if not impossible for Virgin America to be profitable.

Mostly, Virgin America seems to have misread what travelers wanted most, and what they were willing to pay for. “They had an assumption that consumers would choose product quality over price and convenience, and network carriers responded with force,” Hunter Keay, an analyst at Wolfe Trahan & Co., explained to Bloomberg.

Standing in sharp contrast to Virgin America’s struggles is the rise of Spirit Airlines. Along with its fellow fee-crazed cohort across the pond, Ryanair, Spirit has been an airline that travelers love to hate for years. And yet, despite the common complaints about Spirit (customers have to pay even for water and could get hit with $100 fees for carry-on bags), the airline is likely the most profitable of any in the U.S.

(MORE: Sit Tight: How Airlines Are Cramming More Seats onto Planes)

So who is to blame if an airline that’s comfortable and treats passengers well fails, while a carrier that annoys and nickel-and-dimes customers at every turn is a runaway success? We all are.

Brad Tuttle is a reporter at TIME. Find him on Twitter at @bradrtuttle. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

58 comments
devinjelliot
devinjelliot

Total bummer, I hope they figure it out. I always enjoy flying virgin, I can't say I've enjoyed flying any other airline other than maybe Asiana. A clean updated atmosphere with an attractive staff, yeah thats a good formula for me. 

noahkimmel
noahkimmel

Its not just the lack of route network reach. Jetblue was profitable when it was small. The difference is that VX chose to compete on the MOST competitive routes in the country (i.e. transcons and LAX hub). Virgin has no bread and butter routes/cities--AA had MIA, Jetblue has the dominican republic, UA has newark, Delta has the atlantic....Virgin can't command a revenue premium on any route because the most competitive routes are business-oriented and they lack partnerships/FFP/broad network to attract those customers.

dleibsohn
dleibsohn

No! I LOVE Virgin (the only airline about which I've ever said that) and am even willing to pay more to fly it.  I truly hope it can be saved! 

drybean
drybean

As WN's fare increase VX should consider coming to Texas and take on WN at DFW instead of DAL, IAH instead of HOU, and SAT, AUS BRO, ELP... If the fare is the same Sir Richard could fill his planes with WN's passengers who really do want seat assignment and more travel choices.

joanliu1
joanliu1

Flew Virgin once, was utterly unimpressed. What are people seeing? It's aplane. They treat economy like cattle, just like everyone else doesI am beautiful woman and I love good man…..inter racial romance is my dream… so I joined —blackwhitePlanet.С0M—–it's where to- connect with beautiful and excellent people! Also in the media where he started with Virgin Records in the 70's,etc.The writer Brad Tuttle probably need to read a little bit more aboutSir Richard before he writes this kind of nonsense. Have a good weekend:)

dcxr7
dcxr7

price price price.

that is really what it boils down to.

fayvee
fayvee

I would say the hefty flight change fees ($75 per leg) is the main deterrent, especially for business travel that may change at a moment's notice. Southwest has the best flight change program on the market, hands down.

whome
whome

I love this airline and would fly it over any other available. The domestics airlines bullied Richard Branson's ownership in fear of his product improvements and have forced measures to try to lower the experience. The world would be a better place if the other airlines tried to be more like Virgin America.

volta
volta

I like flying with Virgin America (as they serve BOS-SFO route, which I fly once a month). Problem is to get a seat on that route. If I don't book 15 or more days in advance, can't get a seat below 1k USD. 

Kevin_in_NL
Kevin_in_NL

"The airline that travelers love"? Are they kidding?? I don't know who the author of this story spoke to but no one that I know (including me) loves this airline. Flying Virgin is like flying Greyhound in the air. The crews are young, overworked and inexperienced. The schedules are terrible and with ultra-quick and unrealistic turnaround times delays and the pressure to board quickly are excessive. Give me United or Jet Blue any day. I also had the opportunity to stay a hotels with Virgin flight crews on several occasions and you should hear the stories that they shared about what really goes on with the airline. Believe me, after hearing the stories you would never ever want to fly them. Just FYI, Richard Branson does not own this airline. Like most of his affiliated companies he licenses the use of his name for a 2% stake in the company, a board seat and some profit sharing.

ValerieOrsoni
ValerieOrsoni

On top of all reasons listed I think that Virgin America is missing an attractive rewards program. They tried this year but failed to reward passengers like me who have flown over 120 times with them over the past 2 years. So then the choice is easy, revenge and let's fly Spirit!

mrp
mrp

As a Virgin Australia FF I would like to try Virgin America but their route map is too sparse to be helpful once Virgin Australia drops me at LAX. Looking at the respective size of each airline (Virgin Australia 91 planes 50 destinations versus Virgin America 52 planes 19 destinations according to wikipedia) it would seem that Virgin America needs to get a whole lot bigger especially in number of destinations it serves.

msurfas
msurfas

I fly Virgin America every chance I get.  They do it right.  I love ordering from my seat.  The fact that they care about the interior design and customer experience for something other people determined to pay the cheapest to have relatively horrible experience is a refreshing change.  I hope they make it work.

TysonGoeltz
TysonGoeltz

Virgin is my first choice for any trip I book...business or pleasure.  I've flown on enough flights with airlines like American, United, Alaska, etc to know that paying for comfort is worth it.  I hope they continue to add new routes and turn this around.

eddie.hernandez
eddie.hernandez

Virgin America is great (charging docks at every seat, one of the first to offer wi-fi, free wi-fi via Books Chrome Books, Philz coffee onboard flights, personal TV's etc.) but if has done little since.

-Wi-fi is unreliable and Virgin America recently raised rates

-Google Chrome Books partnership is over so no more free wi-fi

-Poor overlap with Virgina Atlantic points system (really, you can only share 10%  across platforms?)

-No alliance membership with other airlines still?

-no mobile site nor app?!?

-poor online experience (for nearly 18 months Virgin America had so many bugs with accounts, booking online, making changes to itineraries etc.) This last bullet point was the most frustrating for me as a long-time customer.

Yuricon
Yuricon

Flew Virgin once, was utterly unimpressed. What are people seeing? It's a plane. They treat economy like cattle, just like everyone else does.

AlokAaronJethanandani
AlokAaronJethanandani

would have to disagree here. virgin america in its current state was what the Apple Lisa was to the personal computer. People love it, but it needs to be iterated upon to find a product-market fit. Maybe all they need to do EXPAND. spend more, create a bigger network and then use economies of scale to deliver the same quality of experience. That will then set the industry standard, like Apple had set the industry standard for quality.

MasergyStricklin
MasergyStricklin

I have two statements, one is business travelers like myself are tied into AA or another airlines miles although we hate using them since they overbook so much and it has been crappy service lately. Secondly, they are not offering enough trips in the major airline hubs like Dallas and Atlanta to NYC, which I take every month. I would gladly switch if they did a true up on my current status and miles and offered a few more routes like DFW to NYC. I am sure that there are plenty of people that would switch as some of my coworkers and I have taken Virgin for DFW to SFO multiple times but the double miles from American is minimizing that. Just my thoughts. 

joshuadegreiff
joshuadegreiff

I think if they lower their prices more, more connections in other countries and more publicity they will succeed in this market, I travel in Virgin and is awesome travel with them but the problem is the connections that a big issue.......Sir Richard is a visionary but he need be open to this market of social networks, internet, and more partnership with miles rewards even more ....and that he will success totally.

sigmadelta
sigmadelta

Stellar leadership that propagates a people-centric style of culture and service, is foundational for long-term sustainability.

It is a creative and generous endeavor that propels both quality and business success, beyond the myopic views that hinge on poor quality, excessive fees, constraints, and pedantic cost-cutting.

chrisfleck
chrisfleck

I travel Virgin American on business often and when ever available. If they offered more routes i would use it all the time. 

Hang in there Richard, there will be a long term payoff. 

giles_g
giles_g

British billionaire playboy?? lol... thats a good one. Branson is a family man and has been for years. He might be eccentric but thats probably the outlandish publicity stunts that Time is referring to. Hardly a playboy.

Branson is not silly... his airline in the US is a flagship for his multiple other businesses. Its an excellent publicity vehicle so it might lose money yes, but how much does it help him make (and how much does it promote on-board, his numerous other businesses)...?  Thats where you'll find the answer as to how its managed to lose money for so long.

Rafael
Rafael

this is a tipical case of a business outside of its natural environment. In the USA advertising must be a little beat more agressive. in the Southeast region it is varely known.

aaronxperez
aaronxperez

Ok... I love Virgin America. They have the best in-flight experience you can get on a US carrier, but I may only use them on 1/25 flights I take. I opt for Southwest most of the other times. Why? Well, they don't seem to understand business travelers all that much. For example, if you make need to change a flight, they charge $75 per change. Customer needs you there a day earlier? Now you have to explain a change fee to accounting. 

The other thing that isn't appealing is their points system. They really offer nothing to regular business travelers. Delta, Southwest, and most other airlines have a membership program that gives their frequent fliers some perk... with Southwest you get free wifi as A-List Preferred,etc. 

If Virgin wants to do better financially, I'd suggest trying to be more friendly towards business customers.

KennyCheng
KennyCheng

It is not necessary the price is too high. It is a revenue management problem: they are not pricing right at the right time and at the right place.

kelangst
kelangst

This isn't a matter of price, it is a matter of availability of the service.  Given the choice, people would fly Virgin because the price isn't that much higher if they only could experience it.  Unfortunately most US companies sign on with travel firms that have higher incentives with one airline or another.  If they could have just a little more penetration and some corporate agreements they could be far more successful.  They are worth the extra money - but honestly this is less about the will of the traveler and more about the corporate policy, which currently favors saving money over their employee's comfort and health.

MPedersenLA
MPedersenLA

Superior product and service will hopefully prevail over price.  I'll pay extra any day and continue to fly Virgin....hands down!  Branson - I hope you have a plan to keep Virgin America going - don't give up.  Flying needs to go back to something special and not the commodity its made to be today.

ipsinc2000
ipsinc2000

An airline that losses $671 million in 5 years not supposed to last for long. But now the right  question is :who's paying for all this losses ?The answers is :Virgen Atlantic, the mother of the child and Mr. Bronson's own pocket who created his own invention in America to take away customers from US Legacy carriers.Mr. Bronson's Virgen America is a mirror of Virgen Atlantic and in fact is not a Low Cost Experiment (LCE).Enjoy all of you, because it is not going to last for long.

DavidLoPresti
DavidLoPresti

I would fly Virgin America in a heartbeat if they flew out of Sky Harbor in Phoenix.

Yelmurc
Yelmurc

The problem with Virgin America is that it is over serving its audience. Sure its nice but its job as a airline is to get people from point A to point B. The vast majority of people who use air travel just want the cheapest way to get where they are going and will tolerate a bad experience  to save that money. The only way Virgin will probably survive is if they figure out a way to provide a better service for the same cost or cheaper as their rivals. How they could accomplish this is beyond me,

JohnShim
JohnShim

Maybe I'm the exception to the rule, but I always look to Virgin first before booking a flight for business or pleasure.  Without exception, the Virgin America experience is amazing - everyone who works there is courteous and respectful (I always seem to get yelled at whenever I fly a major airline home to Detroit for the holidays since Virgin doesn't fly there)If you're taking a coast to coast flight, the additional leg room of Main Cabin (coach) is worth every penny, and if I have to, I can work throughout the entire flight with Wifi AND the power adapters that Virgin provides in each seat.  For those who complain about the food - you get a sandwich on Virgin and sure it costs $9-$12, but a)  it's actually quite tasty, and b)  it's big enough to fill you up.It'd be a huge shame to see Virgin America go under:  I for one would fly a lot less.  Go VA!

alton2c
alton2c

The huge issues caused by the transition to Sabre Reservations system this time last year cost them plenty - I, a frequent VA flier was not able to book a flight. I was forced to Delta at the time, and , of course, not the end of the world. 

Back with VA now. I wouldn't underestimate the issues and cost to VA of that transition.

mc2twit
mc2twit

Candyrae, I think you nailed it! It always good to have someone out there who echo's what you're thinking and said it best!

transfire
transfire

They should all but give away the tickets and just charge high fees for every little "extra".

Of course the real problem with the cost of Airlines boils down to gas millage. Wonder why planes haven't gone hybrid yet?

waleeper
waleeper

It comes down to price.  If you are not the lowest, you lose.  Forget perks, etc. Americans want the lowest price.

They may say they want better service etc., but watch what they do.  We shop at Walmart, eat at McDonalds, and buy the lowest priced airfare we can get.

JustinMichael
JustinMichael

@joanliu1 The writing is on the wall and has been for some time now.  VA was created for the san fran nerd groupies. Cattle heards without adequate numbers will usually fail and thankfully this is what we are seeing here. Give it another 9-12 months. The culture is "laughable" as well as the antics and daily gimics.

whome
whome

@Kevin_in_NL Ridiculous. i've been a loyal flier since initiation in 2007, and go out of my way to fly Virgin. They are always on time, very courteous and friendly, and premium ameneties at Southwest like prices, with direct routes to most of the business destinations I fly. I think the comments on this story are totally out of whack and the story lacked fact checking when claiming that they are overpriced.  If you book relatively early, the costs are cheaper than United and USAirways. and the rewards program is there...even if it could be incentivized more. Everyone I know who flys it LOVES it. Who do you work for Kevin? one of the other domestic carriers, that I avoid at all costs?

DesFDocherty
DesFDocherty

@MasergyStricklin I agree.  I live in the SF Bay Area, I am tied to United for business and loyalty points.  Virgin doesnt offer an auto-match of levels, and there are just not enough flights and hubs from Virgin or partners for me to switch.

airline-pro
airline-pro

@giles_g You are absolutely right. I dont think the writer really know who Sir Richard Branson really is. British billionaire playboy....?? I really started to laugh when I read this. Sir Richard is a real entrepreneur and a serious businessman. And not only in the aviation. Also in the media where he started with Virgin Records in the 70's, etc. The writer Brad Tuttle probably need to read a little bit more about Sir Richard before he writes this kind of nonsense. Have a good weekend :)

airline-pro
airline-pro

@ipsinc2000 Dear ipsinc2000, Would like to correcting various misspellings: The airline has the name Virgin Atlantic Airways and the founders name of this airline is Sir Richard Branson and nothing else. Have a good day! :)

jairus913
jairus913

@waleeper and yet, people eat up iPhonees...I'm not totally sold that quality can't succeed

polarscribe
polarscribe

@jairus913  The difference is that someone who buys a smartphone is (usually) going to own it for a year or two. Someone who rents a domestic airline seat is going to occupy it for one to six hours. They're not even remotely comparable products.

The difference between Southwest and Virgin America is like the difference between a taxi and a Town Car... and how many average people do you know who hire a Town Car to get to the airport? Right, not very many.