Going to America

By David Field in Washington

Richard Branson seems set on expanding his Virgin brand into America but it is taking longer than expected to get it off the ground

From a flashy start with all the marks of a Richard Branson enterprise - intense media attention, high-profile personalities and lots of style - Branson’s US venture, Virgin America, has gone into a holding pattern.

By the spring of 2004, the new low-fares carrier had a big name, former Delta Air Lines president and chief operating officer Fred Reid (left), and big fleet plans. It had inked a deal for up to 105 Airbus A320 family narrowbodies, with a firm order for 18 new aircraft -11 A319s and seven A320s to be acquired by the end of 2005 - along with 15 more A320s to be leased. It also had New York headquarters and an operating base at the San Francisco International Airport.

Since then, though, the carrier has fallen silent. Literally, as Virgin America executives led by Reid make the rounds of venture capital firms, hedge funds and other deep-pocked prospective backers, the company must obey federal rules prohibiting public statements while soliciting funding. Stacy Geagan, the former Delta communications officer who is now Virgin America’s public voice, says: “The Securities and Exchange Commission‘s ‘quiet-period’ rules strictly limit what we can say or even what we can say about when we will have something to say.”

Reid will need to do a lot of talking to raise the $200-400 million in equity and loans that most think are needed to get the airline airborne. When JetBlue Airways was established five years ago with $130 million from George Soros, one of the world's wealthiest men, and backing from some smaller firms, it was the best financed start-up in US airline history.

Since then, the world has become even dearer, and another barrier to investors is the fact that the Virgin carrier would be 49%-controlled by Branson and therefore their stake would be limited. As a foreign national, Branson cannot own a US carrier outright.

In the few public statements they have made, Virgin America officials have spoken of linking major cities in both the eastern and western sides of the country, and have spoken about “common-sense breakthroughs” in on-board service, without giving details. Other representatives of the empire have said that it would likely codeshare with Virgin Atlantic.

When Branson went to New York in June to celebrate the 21st anniversary of Virgin Atlantic, he predicted an announcement of Virgin America backers in six weeks. That deadline was not met, and it will take the airline about a year to go through the regulatory process once it has funds and formally applies for Transportation Department certification.

Rumours periodically surface that Virgin America may acquire an existing airline certificate to speed the regulatory process, and names of troubled carriers such as Independence Air come up as candidates.

Source: Airline Business