Virgin America Tries to Make Flying Fun

Bay Area-based airline tries to change the game.

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    Richard Branson has much to smile about, as his Virgin America airline is now losing much less money than it was a year ago.

    Virgin America CEO David Cush believes flying doesn't have to be painful. He remembers when boarding a plane was exciting and wants to bring back that joy.

    That is why every job applicant, including pilots, flight attendants and baggage handlers, takes a personality test. He wants employees who are hard-wired with positive outlooks on life.

    Virgin America, which is partly owned by Richard Branson, the founder of the edgy British airline Virgin Atlantic, doesn't aim to be the biggest carrier. It only flies between big cities, such as Los Angeles, Chicago and Boston, serving about 5 million passengers annually — a tiny fraction of the size of major airlines like Delta and United.

    But Cush wants Virgin America to be recognized for superior quality — and he appears to be succeeding. The airline, based near San Francisco, has routinely ranked at the top of customer surveys.

    The past month has been a little rocky, though. Since the airline switched to a new reservation system on Oct. 28, customers have not been able to change or cancel flights online or select seats on Virgin America's website. Instead, they've had to call the airline or wait until they got to the airport. Cush emailed a letter to the 56,000 passengers affected apologizing for the problem and the airline says it hopes to have it fully resolved by the first week in December.

    Virgin America's fleet is made up of brand-new Airbus A319s and A320s, fuel-efficient aircraft that seat 119 and 146. Each is equipped with TVs for every passenger, colorful mood lighting and Wi-Fi. Instead of flight attendants dictating meal times, passengers buy food when they want it by pressing a few buttons on their TV.

    "If you talk to people about what is most frustrating about air travel, what comes out is the loss of control," Cush says. "We've been pushing to give people control again."

    Virgin isn't the first U.S. airline to use TVs and friendly service to attract customers. Cush acknowledges some copying as he works to create the California version of New York-based JetBlue.

    "JetBlue came around and had a different type of service. That opened my eyes," he says.

    But his quest to create a fun airline has been stymied by more serious concerns like high fuel prices and a recession whose impact is still being felt.

    Since it started flying in August 2007, Virgin America has lost $661.4 million. Cush expects to become profitable in 2012, a year later than originally planned.

    The privately held company is owned by a New York hedge fund, Richard Branson's Virgin Group and private investors, including Donald J. Carty, the former head of American Airlines' parent company, AMR Corp.

    Cush, 51, spent most of his career at American and left to head up Virgin America just four months after the airline started flying.

    The Shreveport, La.-native is a graduate of Southern Methodist University — yet a giant Louisiana State University football fan.

    In his spare time, Cush likes to swim and fish. In college, he was a DJ, spinning Bruce Springsteen and Pink Floyd tunes.

    Cush visited The Associated Press in New York. Below are excerpts, edited for clarity, of the interview where he spoke about the health of American, his favorite seat and why risk-taking is necessary to survive.

    Q: How is Virgin America different?

    A: The biggest difference is our in-flight entertainment system. It's a nine-inch screen — larger than JetBlue. We've got live TV, on-demand movies, about 3,000 MP3s. We have food and drink on-demand. We're the only airline in the world that has it. You order from the seatback, swipe your credit card. They see seat 12C wants a turkey sandwich and a Heineken and bring it to you on a tray. Carts aren't blocking the aisles.

    Q: Who came up with that?

    A: This was designed before my time but as I tell people, as time goes on and memories fade it will become my idea.

    Q: How much more are people willing to pay for these services?

    A: The model is getting them to pay the same amount with a much lower production cost.

    Q: How can you attract business travelers when your miles can't be redeemed for Hawaii, Europe or other places you don't serve?

    A: The mile problem will be solved early next year. We have basic agreements with Virgin Atlantic and Virgin Australia that will be fully reciprocal. We also have agreements with Cathay Pacific, Singapore and Emirates that will develop into frequent flier relationships.

    Q: In Dallas, you're telling fliers to "dump your older airline for a younger, hotter one." American responded by slashing fares to San Francisco and Los Angeles. Can you survive this fare war?

    A: We'll survive. At current fares, it will not be a profitable route but it wouldn't be such a loss-making one where we would consider any type of reduction. You have to be in Dallas-Fort Worth if you're going to be a business airline.

    Q: In one ad you refer to American as running a cattle car. If you feel that way, how could you have worked there for 22 years?

    A: It wasn't always that way. The industry, out of survival, did a lot of things. One of the reasons I left was because I didn't think the industry had to operate that way.

    Q: Why did you get into the business?

    A: I don't think anyone knows why they get in unless they are a pilot or an aviation enthusiast. I wanted to live in Dallas. American was a big employer. Young, single, the ability to fly around anywhere you wanted to, it all sounded pretty good. Once you get in, you find it so intellectually demanding that you can't see yourself doing anything else.

    Q: Do you think that American is on the right path?

    A: It's hard to tell. There's a culture there that is perhaps a bit risk-averse. In the past, it was always an airline that was willing to accept risk. The industry's consolidated around it and all of a sudden American finds itself in third place. I don't know if they have the answer. I do know their top guys. They're smart, capable but at some point you need to stick your neck out a little bit if you're going to get out of a rut.

    Q: Are you a risk-taker?

    A: Absolutely. But I don't take unnecessary risk and I always have an exit strategy.

    Q: Mile for mile, airplanes burn more fuel than cars, trucks or trains. Do you think this poses a problem for the industry?

    A: If we don't find a way to clean up air travel, we'll become a pariah. We'll be what the coal companies used to be.

    Q: You're in 14 markets. Where would you like to fly to next?

    A: We've been trying to get into Newark, (N.J.) since the day we started. This is a huge policy issue — slots and gates are tied up by legacy carriers. The economics of keeping us out of Newark are huge for United so they'll fly unprofitable (regional jets) just to occupy slots. When we go into markets, fares drop by 30 or 40 percent.

    Q: When you fly your own airline you always pick the second row of coach. Why?

    A: I get to watch the interaction between our in-flight teammates and the customers in first. It's a nice seat, 4A.

    Q: A window.

    A: I'm a window guy. Our in-flight entertainment system has Google Maps. You zoom in when you see something on the ground you're interested in.

    Q: How would you describe yourself as a boss?

    A: I'm probably a tough guy to work for. I'm pretty demanding and part of the reason is the airline business is a demanding business. We have very little margin for error in building this into a successful company. We have 2,500 people that rely on us for a paycheck.

    Q: Do you ever get overshadowed by Richard Branson?

    A: All the time. People want to talk to him, they want to see him. When he's around, I'm just the hired help.

    Q: How much patience do you have for unprofitable routes?

    A: We stopped service to two different places. One because we needed the aircraft, that was Orange County, (Calif.). We didn't see that as a big strategic need. The other is Toronto. We misjudged the market.

    Q: Did you fire the guy who pushed that route?

    A: That was me, so no.

    Q: In ten years, do you see Virgin America being a full-blown national airline?

    A: That's not our goal. The biggest discipline we need to have is not outgrowing the model. That means maybe 100, 150 aircraft, probably no more. The goal would be to be consistently profitable, the highest quality airline where we can hopefully make a few hours of people's day a little bit nicer.

    Q: Will you go public?

    A: As much as it's nice being private — because you don't have to manage to the short term and there are a lot of burdensome regulations that come from being public — ultimately we need to (do an initial public offering.) It's a capital-intensive business. We need to tap public markets and our investors want to take some money off the table. It could be 2013 if the market is ready.

    Q: How do you unwind after leaving the office?

    A: I do a lot of yoga. It's a nice way to separate the mind from what you've gone through all day.