Why an Airline That Travelers Love Is Failing | Hacker News Reader

Why an Airline That Travelers Love Is Failing

business.time.com

Quite a few of these articles have come out over the past few months. This one has glossed over exactly why they aren't making money. According to almost every other article it's because of aggressive expansion. New plane orders, updates to their on board systems next year, new routes, more planes on their pre-existing routes and on and on.

This article has quite a bit more info: http://www.sfgate.com/business/article/Virgin-America-a-hit-...

Sounds like they are getting ready to slow down expenses next year and prep for an IPO.

Not really sure what's made this particular article stick and make the rounds but it's conveniently short on info seemingly to make a more dramatic story.

Now this is a case where a dismissive top comment was actually useful-- in fact more informative than the article itself.

Still working on that problem...

And definitely a case where an automated "middlebrow dismissal" detection algorithm would fail. I looked into it and still don't think it is possible. What makes this comment different from the bad ones? It seems entirely dependent on the context of the article itself.

I'm not trying to dismiss this article per say. Usually I only chime in when something seems a bit off and I've found other info that might be useful to people reading said article.

For instance, this article seems to have been spawned by the recent Businessweek article re: financial forecasts for the airline industry and specifically what it may do to VA: http://www.businessweek.com/news/2012-10-17/virgin-america-t...

The tone of this particular write-up sounded very doom and gloom when in actuality VA seems to be following the annual trends of the airline industry while also pursuing an aggressive growth strategy. Not unlike many extremely popular startups (whether it works out or not, well, that's still quite a few years away).

"per se"

(BTW, thank you for saving me the necessity of reading past the first page of the article.)

One thing I learned from spam filtering is not to underestimate what a statistical filter can find.

For example, the comment in question contains a url. I could easily imagine that turning out to be a valuable predictor. The defining quality of the middlebrow dismissal is that it's a cache dump of the writer's prejudices, and someone doing that doesn't even take the time to think, let alone look up urls; they're not even really writing to inform.

atpassos_ml told me an even cooler heuristic.

He was doing some research on detecting which comments are authoritative based upon textual analysis (no username or social analysis). They made a complicated topic model, but found that the following heuristic is almost as good for automatically detecting authority in comments:

Favor the person with the broadest vocabulary compared to other people in the thread.

This was evaluated on Yelp and Goodreads. IIRC it may have also been tested on HN data.

(reference: Alexandre Passos, Jacques Wainer, Aria Haghighi, What do you know? A topic-model approach to authority identification.)

The problem with disclosing these heuristics as part of your filtering algorithm means that people will try and game the system. They'll include URLs and expanded vocabulary to get higher-ranked comments. And then we win. (Relevant: http://xkcd.com/810/)

URLs and expansive vocabulary? That perfectly describes most spam I get, a viagra store link and a random Hemingway excerpt.

Sure, but spam is already reasonably under control here; post-spam-filter, those things could be predictive, along with other things nobody thinks of.

Funny, I've been mentally building a model the last few days and thinking that URLs that are frequently referenced in comments are likely to be good indicators of middlebrow dismissals. Thinking specifically of links to the various "laws" of internet discussion, logical fallacies, and so on.

But also potentially looking at things like the urls that get linked into regular discussions such as weight loss or political topics. That might go beyond the immediate scope, but comments with those links might have other factors similar to middlebrow dismissals, so they might be worth building into the model.

Trying to catch something like this post would be interesting to add. Maybe an anti-indicator if the link adds value. Then you get into figuring the value of the content of the link. Maybe compare it to the content of the original link, which you would want to be similar, but not too similar. Yeah, that might get involved.

Intriguing. I'd be interested in whether the presence of the phrase "at the end of the day" correlates strongly with low comment quality.

There's no need to analyze the text. The answer will be in _who_ is doing the upvoting and downvoting. I wouldn't even look at the author, just the voters.

Google's Pagerank didn't have to look at the page contents to understand which pages are higher quality. At Quantcast, we categorize related content based on who is visiting, no need to look at the content itself.

The best way to find out is to open up the HN data, in either a closed or open research project. I'd help fund a closed Kaggle competition with NDAs if that's whats wanted. Just consider it a way to learn what works. pg himself would be the final arbiter and likely implementor of what works.

I never see high fares on Virgin flights, and they're often not full. It's pretty easy to gauge the profitability of an airline by fares sold and number of fares, and return on capital and fixed costs by how many flights are done with each plane in a month.

For a while, Virgin was doing $69-89 flights from SFO to SEA, etc., which is probably below the point where even a 100% full aircraft is profitable.

I don't think they're anywhere near as efficient on plane utilization as Southwest, due to network. The other way to make money is to make small amounts on each (full) plane, but fly a lot of flights with those planes.

> According to almost every other article it's because of aggressive expansion

According to the numbers, they lose a ton of money on their existing flights: http://crankyflier.com/2012/07/05/virgin-america-posts-terri...

So I think the gist of the article posted is about right, even if they didn't back it up with the relevant facts: VA's equilibrium fares don't meet their operating costs.

Aggressive, strategically mis-placed, expansion. Other airlines, e.g. Spirit, are expanding profitably on their ultra low-cost carrier (ULCC) model.

The airline industry is being commoditised - Virgin America is trying to move against that trend [1]. What is happening is more fundamental than ill-timed expansion; it's a rejection of Virgin America's core hypothesis (U.S. air travellers will trade low prices and a bit of convenience for a delightful experience). An analogy could be Verizon trying to swim against the global trend towards carriers becoming dumb pipes.

The new routes Virgin America is opening are losing money; Virgin America is presently rolling back select routes [2]. This lends is more consistent with a bad strategy versus 'unlucky exposure to unforseeable systemic factors' hypothesis.

Further evaluating the specific factors to Virgin America versus expansion-related woes hypothesis, one notes that Spirit Airlines (NASDAQ:SAVE) spent 3.6% (44.2%) of revenues (operating cash flow) on capital expenditures in 2011. Delta spent 0.1% (8.2%). Average CAPEX/Revenues spread between Spirit and Delta from 2008 to 2011 was 3.5% (Delta has been out-spending Spirit in 2012). Spirit is generally profitable.

Virgin is betting on a strong consumer or business travel spending recovery in the U.S. If that happens , temporarily depressing costs will work out fine if it can stay solvent long enough to be proven right. If the recent shifts are structural changes, however, they're out of luck.

[1] http://www.economist.com/blogs/gulliver/2012/10/virgin-ameri...

[2] http://www.businessweek.com/news/2012-10-17/virgin-america-t...

[3] http://www.sec.gov/Archives/edgar/data/1498710/0001498710120... Spirit Airlines Q3 10-Q Filing

Great point. There's a counterpoint to this "reverse commoditization" in my home country: Norwegian. Norwegian aggressively pushes for newer planes, lower fuel costs, lower staff costs, less bureaucracy, less legacy processes and less overhead in every step of the chain. They don't take it to the extremes that Ryanair does, but the more nuanced approach seems to piss passengers off less.

Norwegian consistently kicks its competitors' asses (one of them state-owned), because rising fuel prices is pushing margins for all airlines. Having a small edge here means everything when you're competing on price, which is what passengers go for.

Norwegian's core competency is still highly optimised operations [1] - their vision is "affordable airfares for everyone" [2]. Crudely illustrating the point, their operating costs page has 28% more words than their operations and market development page.

[1] http://annualreport.norwegian.no/2009/operating_costs Most gorgeous annual report section ever

[2] http://annualreport.norwegian.no/2009/this_is_norwegian

Even assuming that such a spending recovery would benefit consumers as a whole by ensuring the availability of premium services, to paraphrase Keynes, the customers can remain irrational longer than Virgin can remain solvent.

Their frequent flyer program is basically subpar (and was only added relatively recently), which kept business travelers off. (I like the Virgin America product, but if I can fly United and get upgraded to First, lounges, etc. and earn miles toward flying in International Business or First to Asia for fun, I'll probably suffer through a United transcontinental over a Virgin America flight...)

They won the leisure market to/from SFO, but that's not a big enough market to be a successful airline.

Yup, same reason I stay with United. Their frequent flyer program is insanely flexible. US to Thailand with a week-long stopover in Berlin, flying back out of Singapore, in first class? Sure!

Though, out of my city I don't have a ton of options, living in a United hub.

I'm glad they finally added the status program, but like you say it's not fantastic by any means. Fortunately for me, the only routes I fly regularly are covered by Virgin :)

However I think it's quite wise to get a loyal fanbase before trying to expand everywhere. SFO alone won't make them a huge player, but I for one will be recommending them to my friends once Virgin is available to them.

My wife has been 1k for the last several years. Before we met I had no concept of mileage programs but traveling with her has really opened my eyes.

The funny part is at some point it feels a bit like playing a Zynga game, including the occasional "screw it, I'm so close I'll pay a little cash to bump up to the next level"

Global Services >>> 1K.

Both in terms of perks and barrier to entry, alas.

Virgin owns the SF to SEA nerd bird market for business flights. A Virgin coach seat is as good as biz class in American.

...although conversely, if you're a Virgin Atlantic frequent flier then Virgin America is actually a half decent option, as you get status points with every flight.

Allow me to vent:

The airline industry is byfar the worst run, worst staffed, most inefficient excuse of business ventures. This is the second time I have been stranded at an airport because agents haven't a clue how to navigate the system, dick around and make customers wait, and are incredibly dishonest. I was told today that supervisors were telling agents to, and I quote, "blow off" the passengers today who are desperate to fly. They tell you one thing, make you wait hours, all the while knowing what they told you wasn't true just to avoid customer anger.

Someone needs to completely flip these morons on their heads. They're making flying such an unbelievably frustrating and inconvenient task. I now dread to head to the airport, nervous they'll screw up my reservation or find a way to make me wait unnecessarily. Not to mention how pricey it is now to fly for just 4 hours.

I'm seriously fuming, and this is far from the first time it's happened. The airline industry has consistently delivered the crappiest customer experience I have ever seen.

It's a highly-regulated, highly capital intensive industry, with a complex perishable product, extremely price sensitive customers (it's basically a commodity), with a history of state champion regulated airlines everywhere, and continuing operation of national flag carriers on that basis. International flights are politically regulated as well (i.e. which of the 9 freedoms you get depends on binational agreements), and various countries seriously subsidize their airlines.

Plus, extreme variation in demand with the economy, and cost due to fuel.

So what? That means absolutely nothing to me as a customer.

I'm here speaking with other passengers and am finding that we were all told completely different things. People have been stranded here for 2 days and are being told to wait while others who stroll in with the pilot hours beforehand are given priority standby seats. Let's say there's a valid reason for that, you're sill leaving many customers feeling as if they're being pushed to the side. Everyone feels lied to and ignored.

I'm aware that this is one specific incident, but things like this have happened a handful of times to me, and I'm absolutely certain to thousands and thousands on a daily basis. It's absolutely absurd.

If running an airline isn't sufficiently profitable, there won't be enough spare capacity to handle irregular operations, personalized customer service, etc.

Some of it is just being badly run, but a lot of it is trying to eke out as much efficiency as possible.

The only way to win is not to play; the airline industry still has overcapacity as a result of the legacy carriers and deregulation, so it's not a great idea to enter the market. The exception is air cargo -- FedEx is an AMAZING business.

The folks who strolled in earlier might have more status (miles/revenue) on this airline, and having that means a great deal to the airline's systems and humans. They know what you're worth to the company and whether it's worth bumping someone else lower on the totem. It doesn't feel good but it's generally pretty rational.

So rational, in fact, that I will do all I can to avoid flying this specific airline.

Losing customers in an overbook situation is not a faikure mode.

It's a highly-regulated

-- Not enough, or not in the right way.

Not a political or even an economic argument. The purpose of regulation is to get the consumer something that is a decent product for a decent price, in a manner that is efficient in time and money.

Virgin has proved that on a level playing field they can compete on product, via Virgin Atlantic. Jet Blue was the first Domestic Carrier to even try on the Product Front. The US carriers are apalling and quite frankly embarassing. Even the us automakers have been improving their quality and design in the past 5 years. If they can do it, so can the airlines. =/

The regulations (domestic) are largely about planes not falling out of the sky. They do a pretty good job on that.

The international regulations are both about planes not falling out of the sky (which is good for basically all international airlines, bad for some national domestic airlines), and about political things like who gets how many gates, who is allowed to pick up passengers where, etc.

Some of it is about documenting price and standardizing other terms of carriage, but very little is about consumer comfort or anything like that.

This is a good elucidation. Still a crap product, though. And arguably the business practices of the Airlines are geared towards making informed decisions more difficult. The regulatory body should actually look at <this>, precisely because they are new (these practices were not at all common prior to y2k). Opaque pricing as a marketing strategy, in particular, is a policy concern. The net result is the cost of a trip -- in time and money -- are almost impossible to predict. Part of this is pricing, part of this is the assymetry of the ticketing terms. This makes reasonable economic allocation decisions problematic. And that is actually an issue, for the public and for the regulatory bodies to consider. I'm normally not a fan of bueracracy, but the ticket sizes ($1,000's per year) and the multiplier effect (cost of doing everybody elses business changes) is such that some basic frameworks would probably be productive. In particular, if the industry is on a level playing field, it wouldn't be distortive to competition (any more so then the current concetration issues or the impact of opacity on mkt efficiency).

The obvious problem with this is that one generations "floor" of minimum quality becomes the next "ceiling" when tech changes and innovation promises better/faster/cheaper ways of doing things. Once the power is given to write the rules, then the special interests will ensure they are written for their benefit. Etc. But its still worth thinking the problem through. To big an issue to not even try.

Look at the impact that Heathrow had. It provided London and the UK with a massive advantage over the past 20 years as the English speaking gateway to the EU. And thats despite all of its limitations and problems.

And terrible incentives: http://dealbook.nytimes.com/2012/07/09/american-and-us-airwa...

tl;dr; the executives make the big money by rewarding themselves for going a certain amount of time between bankruptcies

Any mass-scale business that is required to hold customers on their premises for hours at a time in a space-confined area is always going to be challenged with customer service. Combined with the modern consumer who is taught they're always right, and it's a recipe for dissatisfaction. I travel a ton for work and have learned to let things roll off my back. Yet when I travel with friends and family, they will always find something dissatisfying, even if it's on a car trip. Nasty bathrooms at a rest stop, a missed exit, etc. are no different than a flight. When 99% of things go right and you travel at 800mph for hundreds of miles for less than a hundred bucks, people let inferior coffee ruin the entire trip for them. God forbid the complexity added by doing it with a few hundred other people.

You're a sensing a market opportunity. You should be asking the question of why nobody is disrupting it.

Probably because right now an airline is the best way of creating a millionaire, out of a billionaire.

But I agree with the parent, and unfortunately, those who are making money are 'cattle transporters' like Ryanair

The airline model has to be rethought from the ground up: fares, service, route allocation, price segmentation. Throw everything away and start afresh.

Because physics.

I have flown a decent amount this year. Usually [SFO -> LAX, SFO -> LAS, SFO -> SAT]. Almost all my flights have been Southwest, because honestly it is the cheapest. The problem is that nearly every flight leaving or heading into SFO on Southwest is massively delayed. My last experience from LAX to SFO, the flight was delayed four hours. There obviously was a mob of grumpy Southwest customers.

On the other hand I have taken Virgin America a handful of times, and the experience is the opposite. It is a complete dream and pleasure. I love the lighting (feels so sheek).

So what is the problem? Their product is top notch, but they are losing money hand over fist. Normally, a company would just adjust their prices, but in the brutally competitive landscape that is air-travel, prices are everything (see my top paragraph). So, what is Virgin America to do?

I still to this day don't know how Southwest is able to offer flights significantly cheaper than everybody, and stay afloat, while the rest of the air-line industry can't. What is their secret sauce? Cheaper plans? Lower wages? Not sure, but Virgin America should figure it out and adopt it. I am sure it ins't their interior lighting and amazing customer service though.

Southwest's secret sauce is rapid turnaround of planes, flying from cheaper airports, and fleet commonality around one type so they can minimize maintenance, pilot training, etc. expenses. Plus, generally serving second-tier markets with less competition with direct service, vs. hub and spoke, which is only possible through volume. Plus, great labor relations vs. the other carriers.

The other thing they did which helped them a lot was Goldman-level hedging of fuel contracts, although that could have hurt them if prices had gone down (although when they took on all the hedges, prices for fuel were quite low, and everyone expected them to go up.)

For a while it was because they had pre-purchased all of their fuel at 2000ish oil prices using long-term futures contracts. The bet turned out to be extremely lucrative for them. However, most of their contracts are either expired or set to expire soon so I expect their prices to revert to the mean.

They do a couple of other clever things, like only fly a single type of plane to take advantage of economies of scale, and only fly out of airports that have cheaper gate licensing fees. But the futures contracts really helped them through the industry's rough patch so that they could expand and aggressively grow while their competitors were declaring bankruptcy.

http://www.time.com/time/magazine/article/0,9171,1074147,00....

Southwest is THE low cost airline. That's their secret sauce. Virgin is being "the best way to fly" or whatever. Southwest cares about nothing else.

They don't do assigned seating because they found that without assigned seats they were able to fill the planes faster, meaning less time at the gate meaning more time in the air, meaning more legs in a day, which makes them more financially efficient.

Back in the day they didn't pay travel agents the %15, and sold direct instead, etc.

Southwest treats their employees very well, and while there is occasionaly a union squabble of some sort or another, they have much less of a problem than other airlines. Why? Becuase its' cheaper to treat your employees well. Seriously.

This also means that customers are happier because employees are happier.

The attitude of a southwest steward compared to the big three (Delta, United, Continental) is radically different. The big three employees often give me attitude and seem to think that dealing with me is some sort of an imposition-- and so I am loathe to fly on them (it only takes a couple incidents.)

Awhile back southwest merged with a regional carrier (frontier? no, something else) but that carrier was known for a gimick where the employees would sing on landing or do the safety lecture in rhyme and the pilots would tell jokes. Southwest didn't change this practice, and it became optional and now it's not unusual to fly on SWA and have a landing limmerick.

Their ticker symbol is LUV.

Southwest flies into Midland instead of DFW. They fly into the older city airports, not the big fancy new airports. Why? Gate fees are a huge operating cost (basically a license for the local government to extort as much as they can from the airlines for the "priviledge" of providing air travel that boosts the cities tax revenues anyway) ... but soutwest doesn't pay to be in the glamorous locations. You may walk further to your gate and your airport may not be as nice, but it saves them, and -- here's the important thing-- they pass that savings along.

Southwest doesn't serve hot meals. They give you a bag of peanuts labeled "Frills".

They are one of those unique companies like Apple and Zappos and Crutchfield that really put the customer first, and were willing to go against convention to do it.

Nothing against Virgin- I think they're trying to do the same thing and taking the high end of the market, and I'd love to fly Virgin if they had ever had an option on a route I was going (they haven't yet, so I haven't flown Virgin yet.)

But Southwest filters everything they do thru their mantra. They are THE low cost airline. Does whatever help that? No? Then don't do it.

Southwest is a result of focus, and that is a useful lesson for every startup.

I hear the book written by Herb Kehler (sp?) is well worth reading (I think it's called "Nuts" or something like that.)

Some quick corrections:

Southwest operates from Dallas Love Field (DAL) instead of DFW- almost all commercial flights at DAL are Southwest flights. Midland(MAF) is a city about 350 miles away that they also fly to.

Southwest merged with Airtran, not Frontier about 18 months ago- they are still in the process of integrating their routes and operations.

Southwest Airlines grew out of Air Southwest, an intrastate carrier that Herb Kelleher started to provide air service solely within Texas. (Why? To avoid FAA regulations.) They traditionally fly into smaller airports because it avoids higher fees and because the traffic level is lower so there is less time spent on the ground. Recently, Southwest merged with AirTran Airways. For what it's worth, the limericks and gags came from Southwest, not ATA. It's part of their culture.

Southwest does fly into Dallas, but they do so into Love Field (DAL). That's where their ticker symbol comes from; Dallas Love Field was their primary airport for years and still serves as the airport where they have almost complete control and their corporate HQ. They still fly from Love because DFW is almost completely controlled by American Airlines. Southwest was even the direct target of a law (the Wright Amendment) that artificially hobbled service at DAL--and the law only recently started to phase out of existence--because Braniff-now-American didn't want the competition. Neither did Fort Worth, because Dallas and Fort Worth went in together on the construction costs of Love and both were supposed to close their city-owned regional airports to commercial traffic. Fort Worth closed Meacham Field, Dallas didn't close Love Field. Fort Worth sued and lost, so Fort Worth-based Braniff, followed by Fort Worth-based American, lobbied for the law.

> Awhile back southwest merged with a regional carrier (frontier? no, something else) but that carrier was known for a gimick where the employees would sing on landing or do the safety lecture in rhyme and the pilots would tell jokes. Southwest didn't change this practice, and it became optional and now it's not unusual to fly on SWA and have a landing limmerick.

My guess is that you're thinking of PSA (Pacific Southwest Airlines). They were the classic and original "funny" airline.

PSA didn't merge into Southwest, but Herb Kelleher did study them and use some of their ideas.

http://en.wikipedia.org/wiki/Pacific_Southwest_Airlines#Corp...

Flying in and out of SFO is rough. According to flightstats.com, Virgis is on time 71% of the time, United and Southwest 63%, and American 58%.

In comparison, flying from LAX to San Jose: American Eagle 93%, Horizon 89%, Southwest 82%, and flying into Oakland, Southwest is 85%, Skywest is 82%.

I wonder what the solution is for an airline trying to follow this model of "better experience for a tiny amount more money".

It seems like you should be able to simply advertise the fact that yes, we cost exactly $20 more than the cheap guy. And here's all stuff you get for that (dignity, comfort, sodapop and your bags in the hold). And here's how small a fraction of your whole trip that $20 actually represents. And oh, here's how small a fraction of your whole trip the entire $179 you're paying for the flight is.

But there's just so much innumeracy and irrational behavior to overcome before you can get that message across. Try selling the above to the average flyer who will happily take the $159 seat on the airline that charges him $50 to check a bag over the $179 seat that doesn't have any added fees.

I hope somebody cracks it. It seems like you could do it with a whole bunch of published (and advertised) transparency in your pricing and value offered, combined with a campaign encouraging buyers to "sort by happiness" or whatever when browsing at kayak.com.

While not that explicit, that's exactly what Virgin America is doing.

For me it is an easy trade off. When faced recently with a 3 day jaunt out East, my pact with myself was to fly Virgin, or not to fly at all. It's the difference between an acceptable experience and a high chance of a very unacceptable one. Seriously - I have no idea why there hasn't been a mass rejection of the flying experiences in the USA.

Some folks like chasing Air points or status, but ask first - do you really want to spend even more time getting lousy service on a lousy airline?

I'm lucky enough to be based in New Zealand, and these days our flag carrier is simply great. Their Hobbit safety video just came out: http://www.youtube.com/watch?v=cBlRbrB_Gnc

> Seriously - I have no idea why there hasn't been a mass rejection of the flying experiences in the USA.

One reason: Cost

Reason #2: no viable alternatives. We don't have a decent passenger rail system in the U.S. and our population centers are hours|days apart by automobile.

"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 run-away success? We all are."

All? Evidently many people (myself included) prefer Virgin America, otherwise its flights would always be empty. Blaming "all people" is not understanding how a market economy works.

Airlines generally fill their flights by charging the fares that fill them up. But in the case of VA that doesn't add up to enough to cover their costs: people don't prefer them enough to make the costs of their better service worthwhile. That in turn means that consumers' revealed preference is to prefer the value proposition offered by United/American/Delta/USAirways. People might prefer VA to the competition, but they don't prefer it enough to pay the difference in costs, which is why VA is hemorrhaging money.

Perhaps I'm one of the minority? If a VA flight is available, I'll definitely pay the difference (usually negligible). Every other time that I've HAD to fly some of the others (i.e. a VA flight is not available) I end up swearing I'll never fly that airline never again. I've never had that feeling with VA which is why I'll always choose it over any other...

But then again, I may be one of the minority...

Of course if there were enough people like you VA wouldn't be failing. But it is so that must mean there aren't.

You may be missing diego's point. For the sake of argument, consider someone who is willing to pay $1500 for a VA flight. There may not be enough of these people to make $1500/seat a profitable price for VA to charge. But VA's failure does not reflect the preference of that group.

Said another way, those willing to pay a large premium for VA flights are not "at fault" for the companies losses. It is the fact that there aren't ENOUGH people willing to pay enough of a premium.

> It is the fact that there aren't ENOUGH people willing to pay enough of a premium.

That's all I was trying to say. I think it's judgmental to say that the people who buy airplane tickets are "at fault" but their aggregate decisions are the reason VA is failing.

I don't think the issue here is that people genuinely prefer the service of UA/AA/DL/US, or that VX's costs can find too few buyers, but rather that VX lacks a critical feature that domestic US flyers need.

Service to small destinations.

The population of the US is incredibly spread out, and while it'd be fun to imagine the bulk of domestic flying to be jaunts between LAX-SFO-ORD-BOS-JFK-EWR, the less glamorous truth is that the US out-flies every other country on Earth by virtue of local short-hauls.

The large, legacy airlines have an exclusive lock on offering seamless, single-experience flights between short-haul destinations hubbing through major cities.

But clearly there is a large market for direct flights from the Bay Area to Chicago, NYC, etc. If people trying to book such a flight always chose to fly VA and pay extra to do so, there wouldn't be a problem. But they don't so there is.

Sort of, not really.

The problem with flying is that it's a complex function that doesn't scale easily. Even if we assume there was a large enough number of people just flying, say, SFO-JFK to support a new entrant to the route, there is a minimum volume the airline must fly to remain competitive.

After all, no one is particularly interested in a SFO-JFK route that offers only 2 departures a day.

And guess how you dramatically increase occupancy on your main routes? With feeder regional flights. A flight from a small city to a large airport, connect to another large airport, connect to another small city. A much larger percentage of all flights in the US are of this nature than most people know.

The market for SFO-JFK only is not nearly as large as the market for XXX-SFO-JFK-YYY, not even close, and the legacy airlines, by offering regional short-hauls, stand to improve to the quality of their longer hauls by being able to do things like increase airplane size (therefore flight experience) and frequency.

There is a lot more to succeeding as an airline than offering the in-flight experience people are willing to pay for.

Actually they don't Fly to Chicago, I looked it up because I am someone who's willing to pay moderate amounts of money for a better flight. I'm not paying $2k extra for first class ORD/SFO but I'll do $200 in a minute.

I think their problem is they don't offer enough choices to be a regular "goto" place to buy tickets so they slide out of peoples minds.

A counter-example - Singapore Airlines is consistently ranked the best in the world and is also cost effective. Here's a link to an HBR case study: http://hbr.org/2010/07/the-globe-singapore-airlines-balancin...

Singapore airlines get access to a lot of the best long haul routes in the world because its government negotiates it for them as part of larger trade deals.

Singapore is also well situated politically (it has no real enemies anymore, so while China may deny a US airline they wouldn't deny Singapore), geographically and commercially in terms of global trade.

The lesson here is that if you want to run a super cheap airline, make sure you are backed by the government of one of the wealthiest countries and major trading hubs in the world.

Yes, it's kind of like comparing a state owned oil company to Exxon. Another example is Emirates. Can't blame the govt for backing the airline, though, as it leverages a huge strength: Dubai is within 1 stop of virtually all airports in the world.

Off topic but is anyone else bothered by the typos in this article? I would expect more from something published by Time. Don't their editors proof read the online articles?

Edit: Here are the two sentences I found. They're small but they have the staff to check for this, don't they.

"It’s fairly remarkable than (THAT) 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."

"Because Virgin America is young, it doesn’t have a (AS) large a network of routes"

Virgin America is largely modelled off Virgin Australia, right down to the lighting in the planes, the uniforms and the in-flight entertainment. I'm not sure how much of this is borrowed from Virgin Atlantic.

Virgin Australia is a very successful company - started in 2001 by Richard Branson and a few others with about $4 million in capital, 2 aircraft and a single route, and they managed to be around when one half of the cosy duopoly of Australian airline industry went bankrupt in October 2001, as a direct result of the September 11 attacks and subsequent collapse in air travel.

As a result they expanded from 2 planes to 90 in 10 years, expanded from a domestic carrier to an international carrier and have progressed from being a budget airline to much more like the model that Virgin America now has - cheaper pricing but better service, two class cabins and business lounges.

I would expect that if Virgin America proves to be remotely as successful, then it is here to stay.

Is it a good idea to be headquartered in San Francisco? That's halfway between EVERYWHERE, and the vast uninhabited expanse of the Pacific. Most airlines have hubs inland.

(Maybe I'm just bitter because I'll probably never take a Virgin flight due to their route layout. Also I hate SFO.)

I like the ground experience at SFO (it, along with PDX, has my favorite food), but I hate the runways, specifically the two parallel runways which get converted by daily fog into one runway for most of the morning. Which causes predictable many-hour delays.

OAK and SJC are far more reliable, although far less pleasant as airports.

I find SJC quite nice when it's convenient to my destination. I suppose it's not nearly as luxurious-feeling, but it's so much more relaxed. I went through OAK just once, and was surprised how much of a dump it was. Reminded me of Midway before it was renovated/rebuilt. But I'd still choose it over SFO.

OAK will be a lot better once the airport connector (to BART) opens in 2014, I think. That will lure a lot more ex-SF traffic, which will probably cause the traffic to increase, which will improve retail, which might cause the terminal itself to be improved.

There are already some great direct flights out of OAK -- Alaska and Hawaiian direct flights to Honolulu and the Neighbor Islands, etc.

I'd fly VA all the time if I could, sadly they don't do my most common route, DEN <-> SFO :-(

Same here. Alaska Airlines goes SEA/DFW non-stop twice or three times a day. VX makes me connect through SFO or LAX and adds at least a two hour layover. Lack of non-stop is why I don't fly Southwest anymore, even though they're my all-time favorite airline for both price and service[1]. I'd fly VX if they had a non-stop or a one-stop that didn't connect via California. DEN or LAS or even ABQ would be preferable.

1 - 2014 is going to be a glorious year with the Wright Amendment going fully away. I hope to be on WN's inaugural non-stop SEA/DAL flight.

I'm from the UK and flew Virgin America for the first time last month from Orlando to SF for $120 (a 5 hour flight) and thought it was amazing value.

Flying from London 5 hours in any direction costs around 4/5 times more for airlines that have a significantly worse experience than Virgin America.

But saying that I booked a flight to LA a few days ago and picked Southwest because it was $50 cheaper than VA and if the Florida flight would have been $50 cheaper on Southwest I would have gone with them too.

The way I see it is that I can deal with slightly less comfort on a flight if it means I save enough money to buy myself something like a new pair of Converse when I land.

I thought if you flew in or out of London the UK government subsidized the flight costs significantly, as a form of economic stimulus.

Hence Ryan Air has $14 pound flights to Berlin, and stuff like that. (been awhile since we lived in europe, so I could be out of date.)

At my age, and 20 years of flying on Southwest, if I ever got a chance to fly Virgin and it was $50 more, I'd pick Virgin. Historically Southwest has been my favorite airline and most flown airline, but I'm getting too old for the cattle car.

Taxes on flights in/out of LHR, at least, are among the highest I've seen.

http://en.wikipedia.org/wiki/Air_Passenger_Duty

In fairness LHR is pretty much at capacity. Government needs to get on with building a third runway and/or Boris Island.

Seriously, the UK government does not give any money to Ryanair. Some local airports and tourist boards negotiate deals with them, but these are typically for marketing expenses and lowering of gate fees.

Its interesting that the major low cost American airline is famed for customer service, while the major low cost European airline (in fact, the biggest passenger airline in Europe) is also famed for (negative) customer service.

Typically the 14 pound flights are either terrible times or on a Tuesday, which tends to be the cheapest day to fly. Source - I've spent way too much time on the Ryanair website.

Reminds me of Walmart - everyone hates on it but they absolutely rake in profits. On certain purchases, Americans love cheap prices above all else. Plane flights likely fall in this category for most.

Are their any airlines that don't fail over the long haul? With the flux in fuel costs and the need to keep an aircraft in top shape combined with super low fares is seems to be a hard industry to stay alive over the long run. Over my lifetime I've seen a few entrepreneurs seem to crack the business (from Freddie Laker to David Neeleman) and they always seem to hit the wall after a point.

It isn't failing in the same way Facebook wasn't failing when it wasn't making money in its first almost-decade. Virgin is pouring all of its resources into expansion before making a profit, a business model straight out of silicon valley.

It is only a risk and failing if their ability to raise new money is hindered, and Virgin are a long, long way from that.

Airline business is never profitable imho, except if you're running it like Spirit, or AirAsia does. Charge a fee for every nitty gritty stuff that your consumer wants. Extra 10kg? That's $50 for you Sir.

I don't mind that as long as the potential fees are made clear before purchase. That way I can decide what my needs will be and determine if I can navigate that fare structure to minimize my costs. If it were up to me, all passengers and their bags would stand on a scale at check-in and a fee assessed based on total mass. That said, United almost always has the cheapest fare in my city (a hub -- although I think they've become much more expensive since the merger), and I get free checked bags with the Chase card and a solid rewards program.

I fly SFO <-> JFK very often. VX34 there and VX27 or VX29 back are my rides of choice, since I hate layovers and prefer redeyes. The wifi is passable too (don't try to SSH over it, though).

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