Over the 4th of July weekend, I flew Virgin America and was blown away. It's amazing how they've used technology to out-perform their competition in almost every aspect.
Well, their fares were unbelievably great - $170 for a round trip ticket from SEA to LAX two weeks before the 4th of July. Their website is simple and slick, and they have a great model where you're charged a base price and 'frills' come extra (for instance, an exit row seats adds $15 to your ticket cost - I would totally pay for the extra leg room on a long flight). Their check-in and gate counters are Apple-slick and their brand spanking new planes are fitted with pleasant neon lighting and comfortable leather seats. Their in flight entertainment system, called Red (hip with the 'Beta' tag), is superior to any other I've seen in the US. It seemed to have just the right amount of free and for-pay options. Free lineup - live TV, music, games, soda/juice. Paid lineup - movies, food and alcohol (that's right - you order food and drink using the snazzy touchscreen and pay using your credit card). It even has this cheezy-yet-fun chat app which lets you join a chatroom (haven't seen one of those in years!) or send IM to a specific seat. Oh yea - each seat gets its own power outlet, even in economy. Their use of technology on the ground and in-flight seems to have allowed them to reduce staff and yet enhance the flying experience.
By tailoring their service and catering to today's generation, they're focusing on the right things. and the primarily west-coast service seems to be a great fit for their 'attitude'. Oh, and having really pretty air-hostesses helps too. Co-incidence, or perhaps a signature Virgin move ;)
Anyway, I would never fly another airline if a Virgin America route was available and reasonably priced. My guess is that they're losing money like every other airline (but less than others, probably). However, if they're in it for the long haul, I think they're making all the right moves.