Dallas : Virgin America Inc. reported a 28 percent drop in third-quarter profit because of a tax item, but the results still beat Wall Street expectations as the company looks to complete its sale to Alaska Airlines.
Key measurements of revenue per mile declined sharply, however. CEO David Cush blamed rapid growth, which can lead to empty seats as new routes build up traffic, and to the increasingly competitive market for premium service between California and New York.
On the flip side, Cush said Virgin's growth reduced its cost per seat even after accounting for cheaper fuel. The result, he said, was the best profit margins in the airline's history.
The Richard Branson-backed airline disclosed that it has resolved three shareholder lawsuits aimed at blocking the sale to Alaska Air Group Inc. even while it faces a fourth case that threatens to delay or trip up the $2.6 billion deal.
"Suits of this nature come with the territory in any merger, and you find a way to resolve them," Cush said in an interview. While declining to give specifics, Cush said the companies expect to settle the remaining lawsuit, which was filed in September by San Francisco attorney Joseph Alioto.
The lawyer said the deal would reduce competition and drive up prices for consumers. Alioto has sued to block other airline mergers without success, but his case against Alaska got a boost last month when a federal district court judge in San Francisco ordered the airline to give the court advance notice before closing the deal and hinted that he could order divestitures.
The judge plans to hold a trial on Alioto's lawsuit once antitrust regulators in the Justice Department decide whether to allow the sale. Cush said both airlines continue to expect their deal to close in the fourth quarter.
Virgin reported Wednesday that it earned $51.8 million in the third quarter, down from $71.9 million a year ago. The results were dragged down by a $32.9 million expense related to the value of deferred tax assets.
Without sale-related costs, the Burlingame, California-based company said it would have earned $1.19 per share, which beat the $1.03 forecast of analysts surveyed by FactSet. Revenue rose 8 percent to $445.2 million....