Virgin America finally took the skies from its San Francisco base in early August, more than three years after affiliates of Richard Branson's Virgin empire first proposed it.
Most industry analysts note that while the flying public's thirst for low-fares carriers may be the same, legacy airlines have brought their costs down dramatically over the last three years and are now able to compete with a new low-cost player. Virgin America's base at San Francisco International has an array of low-fare carriers that it did not have a few years back and the first three airports served by Virgin - San Francisco, Los Angeles and New York JFK - are now among the most congested and delay-plagued in the nation.
Virgin, as a low-fare but high-service carrier, needs to attract passengers on service as well as price. It hopes to achieve this through its inflight entertainment system, "Red", which offers instant messaging from one passenger to another and lets passengers download music from a 3,000-song archive. Like JetBlue, Virgin offers live television and movies. Whether these features can establish a strong brand is the question.
JetBlue is not worried and says it has seven years of brand loyalty built up. JetBlue faces the greatest exposure to the new airline but also serves a variety of less congested alternative airports such as Oakland near San Francisco and Long Beach near Los Angeles. About 10% of JetBlue's system is exposed to potential competition from Virgin.
US majors have long relied on cross-country traffic and United Airlines official John Tague scoffed at Virgin, even though it competes directly with United's cross-country "ps" service. "We are in the transcon markets to provide a market-leading, competitive profitable product for our very best customers. We're not in the transcon markets to win the volume war at any price," he says.
American's cross-country markets face a similar challenge from Virgin. But Mann and Associates analyst Bob Mann says: "Virgin, with its initially limited network, will have difficulty gaining inroads with corporate accounts."
Source: Airline Business
