Rottweiller
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UK's Branson plans budget U.S. airline
Wed July 16, 2003 09:44 AM ET
(Adds size of planned fleet, Virgin Blue float plans)
By Daniel Morrissey
LONDON, July 16 (Reuters) - Virgin Group [VA.UL] Chairman Richard Branson announced plans on Wednesday to set up a "quality low-cost" airline in the United States by the end of June 2004 to rival JetBlue JBLU.O and Southwest LUV.N .
"We are planning to get in there and make sure there is a third, very powerful low-cost airline in America," Branson said. Virgin would own under 50 percent to meet U.S. aviation laws.
He also forecast that Australian discount carrier Virgin Blue PRK.AX would float in October or November and he saw a pick-up in the London-U.S. market for first-class and business-class passengers after the worst downturn in years.
"The premium traffic is coming back. SARS is behind us, the recession is beginning to be behind us and there is a lot more activity out there," he said. "The Gulf War is also behind us."
Branson made the comments at the unveiling of a new premium class service for transatlantic carrier Virgin Atlantic. He said the ticket, including the industry's most spacious beds, could attract five percent of business-class and 12 percent of first-class travellers from arch rival British Airways BAY.L .
The service will be launched after the summer, coinciding with BA's withdrawal of its fleet of Concorde luxury supersonic aircraft. Branson dressed up as the lead character from horror movie The Texas Chainsaw Massacre to chop through a BA seat.
Branson, whose interests span music, trains and telecoms, said the planned U.S. budget airline would be set up along the same lines as Virgin Blue.
After a modest start of 10-15 planes the fleet would grow to about 30 aircraft within 18 months, Branson said. A number of institutional partners would be involved in the venture.
Under U.S. law, foreign companies are only allowed to own 25 percent of voting rights in a U.S. airline and an economic interest of up to 49 percent. However, last month U.S. Transportation Secretary Norman Mineta urged Congress to raise foreign ownership limits to 49 percent of voting stock.
Branson said he hoped that the United States would permit clauses within the U.S. airline's structure that would result in Virgin taking control should ownership laws be relaxed. By owning less than 50 percent of the company, Virgin would depart from its strategy of controlling the firms it invests in.
The planned airline would be started from scratch, Branson said. "Our philosophy is that (is) the best way to build a company."
He said no decision had been made on whether the airline would use Boeing BA.N or Airbus EAD.PA aircraft.
Wed July 16, 2003 09:44 AM ET
(Adds size of planned fleet, Virgin Blue float plans)
By Daniel Morrissey
LONDON, July 16 (Reuters) - Virgin Group [VA.UL] Chairman Richard Branson announced plans on Wednesday to set up a "quality low-cost" airline in the United States by the end of June 2004 to rival JetBlue JBLU.O and Southwest LUV.N .
"We are planning to get in there and make sure there is a third, very powerful low-cost airline in America," Branson said. Virgin would own under 50 percent to meet U.S. aviation laws.
He also forecast that Australian discount carrier Virgin Blue PRK.AX would float in October or November and he saw a pick-up in the London-U.S. market for first-class and business-class passengers after the worst downturn in years.
"The premium traffic is coming back. SARS is behind us, the recession is beginning to be behind us and there is a lot more activity out there," he said. "The Gulf War is also behind us."
Branson made the comments at the unveiling of a new premium class service for transatlantic carrier Virgin Atlantic. He said the ticket, including the industry's most spacious beds, could attract five percent of business-class and 12 percent of first-class travellers from arch rival British Airways BAY.L .
The service will be launched after the summer, coinciding with BA's withdrawal of its fleet of Concorde luxury supersonic aircraft. Branson dressed up as the lead character from horror movie The Texas Chainsaw Massacre to chop through a BA seat.
Branson, whose interests span music, trains and telecoms, said the planned U.S. budget airline would be set up along the same lines as Virgin Blue.
After a modest start of 10-15 planes the fleet would grow to about 30 aircraft within 18 months, Branson said. A number of institutional partners would be involved in the venture.
Under U.S. law, foreign companies are only allowed to own 25 percent of voting rights in a U.S. airline and an economic interest of up to 49 percent. However, last month U.S. Transportation Secretary Norman Mineta urged Congress to raise foreign ownership limits to 49 percent of voting stock.
Branson said he hoped that the United States would permit clauses within the U.S. airline's structure that would result in Virgin taking control should ownership laws be relaxed. By owning less than 50 percent of the company, Virgin would depart from its strategy of controlling the firms it invests in.
The planned airline would be started from scratch, Branson said. "Our philosophy is that (is) the best way to build a company."
He said no decision had been made on whether the airline would use Boeing BA.N or Airbus EAD.PA aircraft.
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