Fears about airline industry but Virgin America optimistic

There have been fears this week about the airline industry after Oasis Hong Kong Airlines announced it will stop flying and has applied for a voluntary liquidator.

US carriers including ATA Airlines, Aloha Airgroup and Skybus Airlines all ceased trading since the end of last month.

Furthermore, struggling business class airline Silverjet, revealed yesterday that it is in takeover talks.

With surging fuel costs, some US airlines are in danger of going bankrupt. However, according to British entrepreneur Sir Richard Branson, low-cost, high-service start-up Virgin America will weather the storm.

The high percentage of vacant seats on Virgin America’s planes is no cause for alarm given the airline launched last August, said Branson. They are doing well ahead of budget and we’re very happy with the performance, he added.

Virgin America, based in San Francisco, was founded by Branson and partly funded by Virgin Group. The carrier, which launched in the United States 8 months ago, aims to serve transcontinental markets and large airports.

Virgin Group only owns 25% percent of Virgin America because US law prevents foreigners from owning a larger share of a US airline.

Since the airline was launched, fuel prices have soared and some experts wonder if larger low-cost airlines such as Virgin America could buckle under the pressure as well.

Bob McAdoo, an analyst at Avondale Partners, said in a research note that the privately held carrier may be the next to fall.

Mr McAdoo noted Virgin lost $35 million in its first quarter of operations last year. The carrier flew planes that were often only a little more than half full on its primary domestic routes.

However, Branson said he is extremely pleased with the performance of Virgin America’s, predicting it will overcome industry challenges that will sink rival airlines.

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