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Virgin America (VA) March Traffic Soars, Load Factor Slips

Low-cost carrier Virgin America VA reported a significant rise in air traffic for March 2016. Traffic – measured in revenue passenger miles (RPMs) – was 977.46 million, up 14.6% on a year-over-year basis. Moreover, capacity (or available seat miles/ASMs) increased 15.1% to 1.16 billion.

Another key metric, load factor (% of seats filled by passengers) declined 40 basis points to 83.8% as traffic growth was outpaced by capacity expansion. Higher demand for travel in the month can be made out from the fact that onboard passengers increased 14.9% in Mar 2016 compared to Mar 2015. In the first three months of the year, traffic climbed 15.9% on a 15.8% capacity expansion. Load factor was flat at 80.1%.

The carrier, partly owned by British billionaire investor Richard Branson, has been witnessing declining operating revenue per available seat mile (RASM: a key measure of unit revenue), like many other airline players. The carrier, expected to report on May 5, projects a 3% to 5% fall in its first quarter RASM as well.

Virgin America’s March traffic report comes close on the heels of the deal inked with Alaska Air Group ALK to buy the former. The total deal value is approximately $4 billion, inclusive of debt and capitalized aircraft operating leases. The deal, cleared by the boards of both the companies, is expected to be completed by Jan 1, 2017. We note that Alaska Air Group won the bidding war against JetBlue Airways Corporation JBLU, as both carriers had vied for Virgin America. We expect investor focus to remain on further updates pertaining to this burning issue.

Zacks Rank

Virgin America currently carries a Zacks Rank #3 (Hold). Investors interested in the airline space may consider Air France-KLM SA AFLYY, sporting a Zacks Rank #1 (Strong Buy).

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JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report
 
ALASKA AIR GRP (ALK): Free Stock Analysis Report
 
AIR FRANCE-ADR (AFLYY): Free Stock Analysis Report
 
VIRGIN AMERICA (VA): Free Stock Analysis Report
 
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