Virgin America Introduces Jefferson Airplane

Virgin America's attempts to gain approval to operate in the US may still be in a holding pattern but they are working the campaign trail. The airline unveiled its first aircraft, an A320, at San Francisco International (SFO) on Wednesday duly name "Jefferson Airplane" in honor of its San Francisco roots. Virgin America even managed to get Grace Slick to come out for the presentation of the aircraft.

Controversy still swirls regarding ownership of the airline despite the fact that they can clearly show that Virgin brands kingpin, Richard Branson's share is 25%, the maximum foreign ownership allowed under US law. It seems that the US Dept of Tranportation is taking its sweet time in the approval process. One reason for that is that several US airlines are bending the ear of the DOT and every Congressman that will listen and these airlines do carry some clout in Washington DC. One only needs to look as far as the recent Wright Amendment compromise to see that clout in action. Its a fair bet that they would all like to see Virgin America either fade away or have Virgin's start up delayed as long as possible while they shore up their defenses. Terrific post here. But Virgin does not appear to be going anywhere as they are poised to launch the most heavily captilized start up airline in US history. I think the investors backing the airline realize Virgin's name and their ability to generate a lot of swagger and PR make sticking with the process a good bet. Certainly high risk but high reward if it works. Will Virgin America be a west coast version of JetBlue?

PS. Hey, when's the last time you heard "Grace Slick" and "virgin" in the same sentence...yeah...that's what I thought.

NEWS: EU Open Skies...Maybe

The United States continues to grind out talks with the EU on a new "open skies" policy and the latest incarnation appears to be on hold while the two sides fall back and give it a reality check. There are some big terms to be ironed out, not the least of which is the EU's desire to see foreign ownership restrictions of US Airlines eased. On the US side of the pond there are several big airlines that would love to see the deal go through. Click Read More!.

No doubt Richard Branson, head of everything "Virgin", would be delighted if the US would ease up on foreign ownership restrictions. He has struggled mightily to wangle the right financing packaging for his planned US airline, Virgin America. He's close but I wonder if he might drag his feet a bit to see if the EU can swing some better terms for him.

"Open skies"is an important deal for the big US Airlines who feel that profit margins are better on the long haul flights. They would like to expand in that market to shore up their bottom lines. Delta Airlines is especially interested having been locked out of the coveted Heathrow market while watching American Airlines and United Airlines operate there via rights purchased from TWA and Pan Am. Its noteworthy that Glenn Tilton, President of United Airlines, has also come out in favor of an open skies policy.

NEWS: Virgin America on Final Approach?

Virgin America is finally near launch
After months of wrangling to find the right group of investors perhaps Branson has finally got it all sorted. Laws preventing foreign ownership have really put a crimp in Branson style. With the investors forming up Branson can move on to the next step, airline certification. But wait...whats this...a short cut? Perhaps the recent bankruptcy of Independence Air could offer another route? Click Read More!

So here's the deal. Independence Air has already gone through the pain (and, trust me, it is a pain) of getting its certificate and even though its in bankruptcy that certificate is still valid. So what's a bankrupt airline need? Yes...you in the back...CORRECT, the answer is money. Now connect the dots. Who is amassing enough financing to launch a new airline...BINGO...Richard Branson. So whats the probability that the Branson coalition redirects their efforts to sweep in and "rescue" Independence Air. I even thought he might make a run at United but admittedly Independence Air is a much better target for this type of manuever. So hide and watch kids...lets see what happens because I'm not the only one thinking it

OPINION: United Airlines CEO and Foreign Ownership

United Airlines CEO Glenn Tilton has stated more than once (and as recently as yesterday) that the US needs to loosen up on foreign ownership rules for airlines. He goes on about how US airlines have "stood on the sideline" as international alliance formed left and right. He is worried, nay..."alarmed", that the US is not leading this charge. But I'm not here to talk about his quotes and noble concerns about the industry...I'm here to stir the pot with a lot of conjecture and speculation. Why is Mr. Tilton so vocal about foreign ownership laws? Think exit funding, Virgin America and Richard Branson and you'll have a hint of what I'm on about.

Reason 1: United needs money.
United needs cash to fund its exit from bankruptcy and my guess is they are having trouble finding this stateside. What leads me to say that? Hmmmm...maybe its the 3 years in bankruptcy and the continual exclusivity period extensions.

Reason 2: United is looking to merge globally
I've said before that CEO's normally don't make public statements without an agenda. Is it possible that United already has some ideas about who a possible suitor could be? I'll offer up the possibility of Virgin America, the start up airline struggling to start up backed by none other than Mr. Deep Pockets Richard Branson. (A) Branson has lots of money (B) Branson is struggling to find enough US funding to start a US airline because ironically he can't use his own money because of foreign ownership laws in the US!! Is he looking for a loophole via a merger with United?

NEWS: Not So Fast Virgin America

It looks like Branson's latest venture, Virgin America will not be making that mid-2005 start up as their flashy website purports. Apparently its taking them longer than expected to finalize the investment money and to answer the 20,000 plus questions that the Dept of Transportation (DOT) asks new airline applicants. Seriously, I'm not kidding, 20,000 questions! So now it looks like 2006 before Virgin America will launch.

As I look at the buzz surrounding Virgin America I can't help but draw comparisons to JetBlue. This looks to be a well funded start up that wants to deliver a lot of bang for your low fare buck. Like JetBlue, Virgin seems to be hinting that they will deliver lots of high end goodies and services.

I wonder if this is going to be the next big thing for low fare carriers? How much product can you squeeze out of that low fare? Maybe this type of business model is going to be the one that finally challenges Southwest Airlines. As low fares and low fare carriers become increasingly common place it may be the "extras" that attract customers.

OUTLOOK: Virgin America

When Richard Branson, Chairman of Virgin...well...Virgin Everything, looks across the pond at the airline industry he sees something beyond the chaos. He sees opportunity. Which is why he is quickly and quietly putting together his first foray into the US airline market...Virgin America. A visit to the Virgin America website does not reveal a whole bunch but here's a couple of things that caught my eye. Launch is slated for "mid-2005" and plans are to operate Airbus A320's. Virgin America has options for up to 105 A320's. Obviously, they won't start up with that many but they are not thinking small either. Destinations and schedules are not even hinted at yet but it looks like they will headquarter in New York and have a primary base of operations in San Francisco.

This, to me, says that they are thinking coast to coast as opposed to regional. The website alludes to the fact the "state and local governments offered remarkable incentives". No surprise. San Francisco International Airport (SFO) would like to hedge its bet since a United Airlines collapse is still a very real possibility. United has already scaled back operations at SFO leaving lots of vacant maintenance facilities and office space. So why not offer up some sweet deals on choice facilities and throw in some tax incentives to boot. Finally, keep in mind that Branson will not own Virgin America. Laws prohibit foreign ownership of a U.S. based airline. He will, however, be providing "some funding" for the start up. Some funding may be an understatement. Branson rarely goes small on anything. Expect Virgin America to be a well capitalized airline cut from the same flashy cloth as his other ventures. More later once Branson cranks up the media machine.

NEWS: More Doubts on US Airways

I've made it clear that I do not believe US Airways will make it so I'll avoid all that rhetoric again. But I haven't spent much time talking about how the carrier could exit the scene. Along those lines I would like to point you to a really interesting article over in the Pittsburgh Review-Tribune. This article compares the viewpoints of two analysts who offer up two different scenarios.

The first, and most obvious, is a complete liquidation. The airline is simply sold off in pieces and the money distributed. There are plenty of airlines that would like a particular piece of the US Airways operation. You know little things like prime gates at Boston Logan, LaGuardia and Reagan airports.

The second and more interesting is the prospect that another airline might buy the whole operation and absorb it. United Airlines was tossed around as a possibility early last year but, please, let's be serious. Mom always said two wrongs don't make a right. But they mention the Branson's Virgin Airlines (coming soon to a US airport near you) as a possibility. Now that would be interesting and a more plausible idea in my book.

NEWS: Virgin Gets Closer to the US

Richard Branson confirmed yesterday that he is in the final stages of securing the financing required for his low cost US airline. Major backing has not been announced but he wants to get his airline off the ground (get it?...off the ground...nevermind) this year so things should start falling into place quickly. I'm not sure how I feel about this. The market is so capacity overloaded that I wonder about the need for another carrier. But with so many majors on the brink of being sucked into the abyss he must see an opportunity to wedge himself into the market. JetBlue proved that a well funded start up with a decent business plan could carve out a niche. I am sure that Virgin US (or whatever it will be called) will be well funded and Branson seems to have a formula for success. So we'll just have to sit back and watch.