After 5 years and, admittedly, some extremely tough times for airlines in the United States, Virgin America still hasn’t earned a profit.  To the contrary, they seem to be walking backwards in that area in some financial quarterly results.  For several years and certainly since David Cush came to be its CEO, there has been quite a bit of explaining away of these results by saying that growth is driving their losses.

People are starting to ask the question:  When are you going to slow growth and realize some profitability.  It’s not an unreasonable question.

When other airlines are managing profits and doing so with conservative or flat growth, it begs the question as to why Virgin America hasn’t slowed its growth at this point.  There comes a time when an airline needs to “pause” and reassess its operations and I would argue that Virgin America has reached that critical moment.  Pausing and re-evaluating routes and tightening up efficiencies is not a bad thing and it doesn’t mean the airline is stalled.

Virgin America arguably has a fantastic service product and its shown that it can capture profitable passengers on the right routes.  The problem is that it hasn’t really taken the time to ask if some of those routes aren’t better dropped in favor of others.

Furthermore, growth doesn’t always have to come from an organic process.  Looking at Frontier, one could argue that there is opportunity in a merger between the two airlines and opportunity that would have yielded synergies and profits had it been explored by now.  It wouldn’t be Virgin America consuming Frontier, it would definitely be a merger of equals but it could yield some badly needed profits.

I think we are going to see some major heat on the Virgin America team to manage their way into profitability and, more importantly, increasing their cash holdings.  They just decided to start hedging fuel and I would argue that this is a strategy that will tie up more money than necessary and one only needs to look at US Airways to realize that a hedging strategy isn’t necessary to succeed.

I continue to wish good things for this airline but the latest results point to an airline that could tumble quickly if it can’t show that it is getting its act together.

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