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Reuters
UK''s Branson plans budget U.S. airline
Wednesday July 16, 8:08 am ET
By Daniel Morrissey


LONDON, July 16 (Reuters) - Virgin Group 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 (NasdaqNM:JBLU - News) and Southwest (NYSE:LUV - News).
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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.

Speaking at the unveiling of a new premium class service for transatlantic carrier Virgin Atlantic, Branson said the London-U.S. market for first-class and business-class passengers was improving 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 said Virgin Atlantic''s new service, which offers the industry''s most spacious beds, could attract up to five percent of business-class passengers and 12 percent of first-class travellers from rival British Airways (London:BAY.L - News).

The new service will be launched after the summer, coinciding with BA''s withdrawal of its fleet of Concorde supersonic luxury aircraft.

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''s Australian discount airline Virgin Blue.

We will start fairly modestly as we did in Australia, maybe 10 or 15 planes, said Branson, adding that 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 and those that use the Virgin brand.

The planned airline would be started from scratch, Branson said. Our philosophy is that (is) the best way to build a company. He added that no decision had been made yet on whether the airline would use Boeing (NYSE:BA - News) or Airbus (Paris:EAD.PA - News; XETRA:EAD.DE - News) aircraft.