Virgin in America, how will they compete?

Virgin America celebrated its IPO on November 14 with a major financial splash. The company saw its stock soar 30% on its first day as a publicly traded company, according to Businessweek. Some industry watchdogs are saying this is just one more reason to believe this is a great time to be in the airline business. Hey, if you look at the success of other American-owned airline companies, it’s hard to argue with that assessment.

But there’s more to Virgin’s success than a warm and ready market. Not only do they bring a fresh and exciting brand to the game, the company has developed a specific niche around which to build their brand. Ask frequent travelers and they will sing the praises of Virgin’s cross-country flights, complete with unique style, leather seats, better than average food, and convenient, high-tech ordering systems. The attention to detail and focus-grabbing touches have garnered Virgin awards both in the travel industry and from the accolades of its loyal legion of repeat customers.

Now Virgin has begun to transform that acclaim into profit. In the first nine months of 2013, the company lost $4 million. In that same time frame this year? Virgin earned $56 million. Not a bad turnaround. While some of the credit for that better bottom line can be laid at the feet of lower fuel prices, that sort of turnaround can’t be credited to lower costs alone.

Overall, again according to Businessweek, the demand for travel services has increased dramatically. So…the pie is bigger. But that doesn’t automatically mean every airline will benefit. Sure Bloomberg has the US Airlines Index at almost 60% this year, but if a company is not poised to take advantage of the changes in the market they will not only lose that opportunity, they could also lose the market share they already have as a result.

One of the best ways for Virgin to avoid losing market share in a growing market – at least in the short term – is to cement itself in its pre-established niche. Not to hide from the Big Boys, but the fight from a position of strength. As it continues to define itself to the American traveler, that “niche” airline will create one growth opportunity after another.