Virgin America eyes NY, SF.....?

[General Lee]

Reuters
Virgin USA Airline Startup Eyes NY, SF
Monday May 24, 10:24 am ET


NEW YORK (Reuters) - British entrepreneur Richard Branson said on Monday the Virgin USA startup airline, which is tentatively set to launch sometime next year, has narrowed its choices for a home city to San Francisco or New York.

Speaking at an entrepreneurs' summit, Branson said the carrier, which does not yet have a name, route structure or airplanes, was considering buying aircraft from Boeing (NYSE:BA - News) or Airbus.

"I can't at this stage confirm whether it's going to be Airbus or Boeing ... I think the airline is going to need about 50 planes," he said.

The United States currently restricts foreign ownership of U.S. airlines, allowing a maximum 25 percent voting stake and 49 percent total equity. Some industry experts have expressed concern about how Branson plans to deal with the restrictions and whether he would truly cede control.

Fred Reid, former president of Delta Air Lines (NYSEAL - News), is spearheading the Virgin USA start-up from New York and is said to be busy trying to line up investors.

"We will not own the airline," Branson said in response to a question about the ownership laws. "It will be owned by American companies, and American companies will run the airline. We will have a stake in the airline -- we will license the Virgin brand to it."

Last month, sources familiar with the matter told Reuters that Virgin USA executives told Boeing Commercial Airplanes executives in Seattle they were out of the running for the airplane order, although they cautioned that jet deals often change up to the last minute.

The Virgin order would likely be the largest order from the United States this year, as most American carriers remain mired in a deep financial downturn and are not thinking about buying planes but rather just trying to make money.

Airbus, based in Toulouse, France, is 80-percent owned by the European Aeronautic Defense and Space Co. NV (Paris:EAD.PA - News; XETRA:EAD.DE - News), with the remaining 20 percent held by British aerospace and defense industries group BAE Systems plc (London:BA.L - News).




First of all, which NYC airport is possible? And, how would another large LCC affect Jetblue in NYC? What happened to BOS?

Bye Bye--General Lee

 

[General Lee]

How would that affect Jetblue if NYC was chosen? LGA and EWR seem to be full.....

Bye Bye--General Lee

 

[Dizel8]

How will it affect Song?

Well, starting up a LCC in an area already being used as a "hub" by two LCC's, Song and jetblue sounds like gutsy move, but wise? Maybe he will buy Song

Branson is a smart man, but if I were to start an LCC, I would not base it in JFK, DAL, ATL, MDW etc. I would probably go looking for some place with a large population and less access to low fares.

Sure he can compete, and if his cost is low enough, even beat jetblue. You can beat SWA, if your coffers are deep and you can fly for less, heck, you can do it even if your cost is higher. Just depends on how much of a loss you are willing to take and how long you can aford to take it.

 

[General Lee]

Dizel8,

Good try at trying to turn that around. Song doesn't really have the NYC base as Jetblue does, and it also hits all three airports. Jetblue has really avoided all LCC competition--it is true. I think the only direct competition Jetblue has is with Song on FLA and LAS routes from JFK and BOS--and AWA from JFK to LAS. That's really about it. I don't think Jetblue competes directly with Southwest at all. That probably is a smart plan, but eventually the LCCs will grow and go after that same low fare passenger. Sure, that will affect Delta too---but we seem to be defending our hubs--and have large connections with hundreds of RJs from places that LCCs will probably not frequent. Song will stay in there and compete with you--and then it will be interesting to see where Virgin USA would go from JFK (I assume) against you guys. (Probably not LGB) Sure, they could also choose SFO---but with the common wx delays--they might just make it a smaller hub---or "focus city" like you guys call it. It will be interesting.

Bye Bye--General Lee

 

[Dizel8]

General, I am disppointed.

It was not a question of turning it around, but if VUSA was to start up in JFK, you do not think it would affect Delta in general and Song in particular?

Song has no "base" in NYC?. Wow, could have fooled me. You think if VUSA were to show up in JFK, that Song would not feel competetive pressure? As a matter of fact, one could almost speculate, that Song would be the first victim.

 

[General Lee]

Dizel8,

I too am disappointed. Delta's hub at JFk is primarily a INTL hub that has passenger connections from Europe. That is why we only have 3 or so flights to LA, 2 to SFO, 1 to LAS(mainline vs Song), 2 to SJU, 2 to DEN, and a bunch of RJs that leave after the INTL widebodies come in around 3pm or so. I think you would have known that---you probably see our 767ERs all of the time---mainly leaving for Europe after 5 pm. Come on. Song does have a good presence at JFK---but mainly to FLL, PBI, RSW, MCO, TPA, and one flight a night to LAS (one that I have done a few times). The rest of Song out of NYC is mainly out of LGA--with service to all of the same cities, and a few flights out of EWR---4 to MCO and 1 to FLL. Song has more flights from BOS and BDL.

The rest of Delta's flights out of NYC consist of the Shuttle out of LGA to DCA and BOS, and hub connecting flights to ATL, CVG, DFW, and SLC. Comair also has a strong presence out of LGA---going to JAX, RDU, SAV, BNA, CHM, etc......That is it.

As far as how a Virgin America start up in JFK would affect us---probably somewhat----competing directly with us to FLA and some West Coast stuff. But as I said--most of our NYC traffic is feed to our hubs--and those Pax continue on to connecting cities. The main feed for our JFK flights domestically comes from our over stuffed European connections. Virgin might connect some pax from London---but we can't even fly to London from NYC--since only AA and UA can fly to London heathrow from the USA, and CO flies to LGW from EWR.

So, again, how might a presence of another LCC at JFK hurt Jetblue? It could, and I think Fred Reid might still hold a grudge on your CEO. I think you and Virgin would be fighting over the same NYC passengers----along with Song to FLA---and the rest of us would be connecting passengers through NYC. It will be interesting to see which base is chosen.

Bye Bye--General Lee

 

[a320drivr]

Branson flew jetblue today from JFK to SJU. Must be checking things out.

 

[lowecur]

general

So, again, how might a presence of another LCC at JFK hurt Jetblue? It could, and I think Fred Reid might still hold a grudge on your CEO. I think you and Virgin would be fighting over the same NYC passengers----along with Song to FLA---and the rest of us would be connecting passengers through NYC. It will be interesting to see which base is chosen.

Bye Bye--General Lee

Don't believe anything Branson has to say at this point. He wants everyone guessing, and he's more than happy to add fuel to the fires.

First he said Boeing was out of the bidding, now they are very close to Abus. New York was never really in the bidding, and now they are. Branson may have made a mistake by naming his CEO so soon. Just how do you think that looks to regulators that want to see 51% USA ownership and control?

B6 owns JFK! They will get the additional slots they want and don't be a bit surprised to see them offer international routes at some time in the not too distant future.

Incidently, I went to a stockholders meeting for one of my investments in NYC this past Wed. I caught the 1:45pm Song flight back to PBI. I was pleasantly surprised. Not bad!!

 

[General Lee]

Lowecur,

First of all, thanks for contributing to my mortgage. I hope you did like Song---I think it is a good product, as long as you can put up with some of the corny things the stews say on the PA. The seats are nice, the Dish network TVs are nice, and if you help your fellow pax with his/her bags--you could get a free ticket for the slow period (Sep-Nov). Did you try an $8 sandwich? They are good, believe it or not.

I would think that someone in NYC would be happy to have another LCC at JFK--and we all know that JFK is under utilized except for about 3 hours each day. (5pm to 8pm) I can't see anyone else at LGA, and EWR is called the "sewark" for a reason---long takeoff lines and not a lot of extra space at the terminals.
I think JFK is the logical choice if they are going to pick NY as a primary hub. Jetblue will be the primary loser if that was the case, since most of the other airlines at JFK have INTL connections in place primarily. Also, Fred Reid never really liked Neeleman and maybe---just maybe---he is going after him. Also, NYC is the largest city in the world and has potential. If the gates are tied up at LGA---JFK is next.

Thanks again for flying Song.

Bye Bye--General Lee

 

[Dizel8]

If Fred Reid is making business decisions based upon a grudge against Neeleman, then I wish Branson good luck! On the other hand, Reid is well aware of the true cost and strenght of Song, perhaps he might just bite the hand that fed him.

I see the big loser being the "LCC" with the higher cost, whether it be based in EWR, LGA or JFK.

Keep eating those $8 sandwiches, DAL needs the proceeds

 

[a320drivr]

May 24, 2004--The new US airline that Richard Branson is planning must meet US regulations on foreign ownership for it to get off the ground.

According to a Reuters report, if Branson is the source of the capital used to establish the new airline, ownership requirements may not be met.

"Since we require US citizenship to own the majority interest in a US airline, if Mr. Branson were to use his capital to establish a Virgin Express in the United States... the test he's going to have to be able to meet is, is it a US citizen that controls the airline," said Norm Mineta, United States Transportation Secretary.

Branson has already recruited former Delta executive Fred Reid in to run the company. He is also in talks with Airbus to acquire new aircraft. (see “Delta president to run Virgin USA,” FLTops TODAY archives, March 12, 2004).

 

[General Lee]

Those $8 sandwiches are probably a lot better than those blue potato chips! And, we make money off of ours. But hey Dizel, try not to get too testy here---I was just throwing out a question about what might happen to Jetblue if Virgin st up a base at JFK also. There is a possibility that Jetblue might have some real competition---and not just to FLA and LAS from Song. That could be serious for you guys---and we can't over look that.....We have stiff competition from a lot of LCCs----and we just need to come up with a good plan now--which is being hammered out. I am sure Reid learned a lot from Song---and he knows also that it is doing better after the first year of service. Even you guys had a lean couple of years at first.....

And, I think Reid will get new airplanes with incentives (just like you guys)---and then they may have lower costs than you! Wouldn't that be a twist? But hey--they may choose SFO...

Bye Bye--General Lee

 

[G4G5]

What you need to keep in mind is that Branson is looking to connect his passengers beyond the confines of his current gate ways.

IMHO he is looking at his current situtation and asking the question, "How can I do better"? If he fill's X number of 744's with people who are just flying LHR-JFK. How many A380's seats (with 550-600 folks) could he sell if he offered connecting service beyond JFK?

He in turn is providing his own feed. If he can fill an A380 from LHR, Gatwick and Manchester. That all arrive at the same time into JFK. You are looking at 1500-1800 folks in just one wave. Hypotheticly 50% are O&D, the other 750-900 would be looking to connect onto one of his A320's. At approx 160 seats per A320, you are looking at filling 5 A320's. Now consider that he has to feed into those A380's to send them back over the pond. Then sell a few local tickets and it's easy to see where the 25 aircraft order comes from.

He can support his own Virgin USA, with his Virgin Atlantic. This is a tremendous advantage. Branson is for real.

 

[B6Busdriver]

There is a possibility that Jetblue might have some real competition---and not just to FLA and LAS from Song. That could be serious for you guys---and we can't over look that.....We have stiff competition from a lot of LCCs----and we just need to come up with a good plan now--which is being hammered out.

Bye Bye--General Lee

So Song isn't real competition then huh? Sorry, cheap shot but I couldn't help myself. The sooner we all learn we are along for the ride the easier life is (at least for me).
Who knows what might happen. Maybe Branson coming to JFK is the reason we keep hearing JetBlue is getting A330's. Personally, I think getting A330's would be a mistake...for now. Maybe JetBlue's hand will be forced to keep competitive then again maybe monkeys will fly out of my butt. All speculative crew room fodder for now but in the mean time I am enjoying the ride.... Woohooo....

 

[General Lee]

B6busdriver,

I think you know what I mean, but hey--it was a good shot. I meant competition from a lot of cities from JFK---Song only competes with you on 7 or 8 cities total......(Very well, I might add too...)(ask lowercur--he just flew Song and actually liked it)

You are right, we are along for the ride---but it is fun to look outside and watch....Take care.

Bye Bye--General Lee