Virgin Atlantic Airways Ltd. plans to launch its U.S. low-cost carrier, Virgin America, by mid-2005 and will acquire and lease up to 105 Airbus SAS aircraft for the service, the head of the airline said yesterday.
Frederick W. Reid, Virgin America's top executive, said the carrier plans to hire 3,000 workers. Reid resigned as president and chief operating officer of Delta Air Lines Inc. in April to take over the new airline, which will be 49 percent owned by British entrepreneur Richard Branson. Federal law restricts foreign ownership of U.S. airlines to 49 percent.
Virgin America's routes have not yet been determined, Reid said, adding that the carrier would eventually serve the Washington area.
The Airbus deal was a blow to Boeing Co., which has been marketing its single-aisle 737 aircraft to low-cost carriers. Reid declined to release financial details of the deal, saying the airline plans to order 33 Airbus A319s and A320s with an option to buy up to 72 more.
Airline industry observers said Virgin is a latecomer entering a highly competitive low-cost, low-fare market. "It's getting to the point where the market is going to be saturated with low-cost carriers," said analyst Raymond Neidl of Blaylock & Partners LP. "Virgin will be one of the last through the door."
Reid said travelers will ultimately decide which carriers succeed. "There is upheaval today as customers decide what they want out of an airline. We will do our very, very best," he said.
The crowded field adds another carrier today when Dulles-based Independence Air, formerly Atlantic Coast Airlines, begins flying out of Dulles International Airport.
Virgin America's corporate headquarters will be in New York, and its maintenance operations will be based in San Francisco. Reid said the airline had considered setting up at Dulles International and Boston's Logan International airports. Virginia had offered incentives including tax breaks to attract Virgin to Dulles, Reid said. "It was a very tough decision," he said.
San Francisco and California offered the airline more than $15 million in grants and incentives. New York state and city officials offered Virgin more than $11 million in grants, taxes and other incentives, said Virgin America spokeswoman Stacy Geagan.