http://www.miami.com/mld/miamiherald/business/national/8177284.htm
Posted on Sat, Mar. 13, 2004
Delta's President Leaves to Pilot New Virgin USA Airline
By Steve Huettel, St. Petersburg Times, Fla. Knight Ridder/Tribune Business News
Mar. 13 - Delta Air Lines president Frederick Reid will leave the nation's third-largest airline to run
a discount carrier that British entrepreneur Richard Branson has pledged to start early next year in the United States.
Reid was passed over for Delta's top job last year when chief executive Leo Mullin resigned and was replaced by Gerald Grinstein, 71, a longtime board member. Reid, 53, had been considered Mullin's heir apparent after being recruited from Lufthansa German Airlines six years ago.
Branson, the founder of Virgin Atlantic Airways and other businesses under parent Virgin Group Ltd., has talked about launching a discount airline in the United States for years. The airline, called Virgin USA, has no planes, pilots or announced destinations.
But Branson expects to name a U.S. headquarters -- at Boston's Logan International Airport, San Francisco International or Dulles International outside of Washington, D.C. -- in a few weeks. The selection of Reid, a respected airline veteran, marks a major step forward, airline experts said.
"This gives them enormous and immediate credibility," said David Field, Americas editor for Airline Business magazine.
Reid was involved in last year's launch of Delta's low-fare division, Song. Equipped with high-tech, seat-back entertainment systems and hip marketing, Song was designed to compete with JetBlue Airways. That sounds like the formula Branson is developing.
"The product will be sexy," Frances Farrow of Virgin USA told Business Week. "Not like Southwest but more like a JetBlue Plus."
Virgin USA should reflect the iconoclastic spirit that Branson, an adventurer and bon vivant, imprinted on Virgin Atlantic. The airline painted pinup girls on its planes and offered inflight massages on the way to becoming Britain's second largest airline, with flights from London to the United States, Caribbean, Africa and Asia.
Reid's first job will be shepherding Virgin USA through the federal government's certification process, a Virgin Group spokesman said Friday.
Branson said in November that Virgin Group and its partners may invest about $200-million to start the airline. Under federal law, foreign companies can't own more than 49 percent of a U.S. airline or control more than 25 percent of voting shares.
At the time, Branson said he was talking with "three or four" potential airline or venture capital partners to own the rest. Reid's selection should help convince investors that Virgin USA is a real deal, said Darryl Jenkins, a professor at Embry-Riddle Aeronautical University in Daytona Beach.
"This is serious," he said. "The fact they've got someone of Fred Reid's stature will help them find a good U.S. partner."
Reid worked at Pan American World Airways and American Airlines before moving to Lufthansa, where he became the first American to serve as president of a major European carrier.
Meanwhile, Delta is struggling to complete with JetBlue, Southwest and, perhaps soon, Virgin USA. The airline headquartered in Atlanta has some of the highest costs in the industry and is trying to its convince pilots to take a 30 percent pay cut.
Delta reported a $773-million loss for 2003 and recently said it expects to lose about $400-million for the quarter ending March 31.
Information from Bloomberg Business News was used in this report.