Virgin America is a runaway favorite with fliers. It tops airline service quality rankings and leads the list of best U.S. carriers chosen by Condé Nast Traveler readers.
So why can’t this most promising of airline upstarts share in the industry’s rebound? Virgin’s timing—entering a notoriously difficult business just before the financial meltdown—may be one reason. But lately Virgin has been pointing the finger at another culprit: big airline bullies. When Virgin recently entered the Newark–San Francisco market, a route where United had a virtual monopoly, the response was swift and unmistakable. “They immediately dropped their fares to match ours and doubled their flight frequencies,” grouses David Cush, CEO of Virgin America. “Clearly their intention is to drive us out of the market.” United defends its response as smart business strategy and denies that it has undercut Virgin’s prices. “Any time a competitor comes into your market and lowers fares to stimulate demand, we’re going to match those fares,” United CFO John Rainey told CNBC. Adding extra flights is yet another move to handle that demand, he claimed. The carrier now has a fleet of 53 aircraft but has lost more than $500 million in its six years of operation, though recently Cush said that the outlook was improving and profits were in sight. In the meantime, some observers contend that Virgin may be a victim of its own success—by trying to be all things to all people, both high end and low, it may be more of a threat to the big airlines than, say, a scrappy budget line like Spirit. Asked why Spirit gets left alone by the major carriers, CEO Ben Baldanza explains: “They don’t really bother with us. If you’re a Nordstrom, do you worry about the Dollar Store that opened across the street?”