The first details of Virgin America are being firmed up as it selects a name, base and aircraft type.
Virgin Group's Richard Branson will call his new low-fare, US-based affiliate Virgin America, and its head, Fred Reid, says it will buy and lease as many as 105 Airbus narrowbodies. But beyond the name and aircraft choice, Reid has revealed few details of the widely awaited start-up.
The carrier, the name of which had not been unveiled until now, will not start flights until the middle of next year, months later than thought. Reid told reporters at the International Aviation Club that market timing was crucial, but dismissed speculation that the window of opportunity for low-fares carriers is closing, with the firm statement "there is no window".
Reid would not discuss Virgin's routes "because the market is just so fluid", but said that because San Francisco International airport would be its operations base and because New York City would be its corporate headquarters, "we'll probably fly between the two cities".
Analysts expect it to focus on longer routes such as the transcontinental markets and Florida. "This airline intends to be utterly consumer-driven, market-responsive, offering high value for low fares," says Reid, adding that he believes Virgin America's market "might be ready to trade up". Some interpreted this to mean that Virgin America may target business travellers.
The company has yet to apply for US regulatory approval, and will not do so "until the time is right", Reid says. Virgin is seeking more US investors and would comply with limits on foreign control of a US flag carrier, which is now 49% of shares and 24.9% of voting control. Virgin America would be an affiliate of the Virgin Group, not a subsidiary, and its control would be in the hand of US citizens. "This airline will be very much born in the USA, despite all the publicity about its illustrious foreign investor," says Reid. "This project will be the only airline ever to be launched in America with the power and respect of a well-established global brand."
Virgin America will not apply for an air operator's certificate until its has raised a "highly adequate" amount of capital, a goal that could take until the end of the year.
US regulators have stressed that their test of citizenship is whether or not a foreign national controls the long-term business strategy or the day-to-day business operation of a carrier. "Richard believes in giving each company a great deal of autonomy," Reid points out. The new airline does not have agreements with other Virgin Group entities, such as its entertainment and telecommunications companies, although Reid does not rule that out.
Reid also announced the hiring of key executives, almost all US citizens, including veterans of Navitaire, CSFB, US Airways, Northwest Airlines and Atlas Air. He also told the aviation club that the Airbus aircraft will all be powered by CFM engines. The deal consists of a firm order for 11 A319s and seven A320s to be delivered early in 2005, and that it will lease 15 more A320s from GE Capital Aviation Services. Reid would not put a price tag on the deal, but the firm order for 18 aircraft is worth about $1 billion based on catalogue prices.
DAVID FIELD WASHINGTON
Source: Airline Business
