Lower fuel cost propelled Virgin America Inc beat market forecast during the third quarter. Virgin America has posted revenues of $71.9million during the quarter as against the forecast of $67million.

However, Virgin America indicates the drop in its earnings per mile in the forthcoming fourth quarter owing to rising competition in the aviation sector. 

The California-based airline operator registered $71.9 million net income in the third quarter recording a 73 percent growth rate. The analysts estimated the airline's earnings at $67mn or $1.56 per share. The revenues were $73 million if special items were excluded and this translates into $1.64 per share.

The passenger unit revenue, a measurement of revenues to capacity, is expected to ease in the next quarter. The passenger unit revenue is the indicator of the long-term health of any airline.

Virgin America expects that passenger unit revenue may fall in the range of three to five percent in the fourth quarter when compared withe the previous corresponding quarter. 

Virgin America posted operating income of $73.9MN and operating margin of 18 percent. The fully diluted earnings per share (EPS) excluding special items were $1.64. The fully diluted earnings per share on GAAP basis were $1.61. 

Virgin America's President and Chief Executive Officer David Cush said: "Virgin America continued its strong financial performance in the third quarter with record earnings and margins. We're well-positioned to grow the airline, while maintaining our low-cost model, driving year-over-year industry unit revenue outperformance and improving ancillary revenue."

After slashing airfares, the passenger unit revenue guidance may be further worse than it was forecast. The passenger unit revenue dropped 2.7 percent during the third quarter. Available seat miles (ASMs) during the third quarter rose three percent.

Virgin America concluded the third quarter with 55 Airbus A320 aircraft and it added two more A320s during the quarter.

The cost per available seat mile (CASM) excluding special items dropped 7.7 percent to 10.13 cents. The drop in fuel costs also led to the decline in CASM.

The average economic fuel cost per gallon including taxes and impact of hedges of $1.92 and this is 38.7 percent lower than the average of year-on-year cost. 

The capacity is outpacing the demand in many cities in the US. As a result, Virgin America slashed air fares. Cush further said that the airline is planning to introduce cheaper fares with restrictions from next year onwards and this is likely to intensify competition in the domestic aviation.

Virgin America is also investing in its product so that it can continue improving the guest experience in the aviation industry.