Virgin America, a carrier closely tied to British entrepreneur Richard Branson that will focus on low costs and in-flight amenities, made its much-publicized inaugural U.S. flight Wednesday — after a delay caused by a New York storm.
Virgin America’s scheduled 10 a.m. flight lifted off about 10:50, said spokesman Gareth Edmonson-Jones. Onboard were Branson and Chief Executive Fred Reid, who was late arriving at the airport.
“What a strange day,” said Virgin Group founder Branson. “I think half our guests haven’t made it to the airport.”
Comedian Stephen Colbert, scheduled to attend a ceremony at the airport, didn’t make it.
“He was in a car for 4 1/2 hours and turned around in the end,” Edmonson-Jones said.
The delay was a timely reminder for the new airline — which offers leather seats, mood lighting, entertainment systems, first-class seating and low fares on point-to-point flights — that the U.S. domestic market is fraught with difficulties.
“Everyone knows the quality of service of the big carriers in America has always been rather sad,” Branson said later after a news conference with San Francisco Mayor Gavin Newsom. “The carriers have never cared about their passengers, never given their staff the tools they need, never entertained their passengers, and they keep going bankrupt, going into Chapter 11. The industry needs new blood, it needs Virgin America.”
U.S. carriers such as Delta Air Lines Inc. and Northwest Airlines Corp. have only just emerged from lengthy restructurings in bankruptcy as they cut costs to deal with higher fuel prices and tougher competition.
Tough battle to launch
Like JetBlue Airways Corp. seven years ago, San Francisco-based Virgin America is accenting hip customer service on flights aboard new Airbus A320 aircraft in an attempt to build loyalty in an industry with sharply deteriorating reliability and customer satisfaction.
Virgin America spent nearly two years under regulatory scrutiny and won approval to operate from the U.S. Transportation Department only after promising to restructure its ownership and board and distance itself from Branson’s Virgin Group, which runs Virgin Atlantic Airways Plc.
“It’s been a tough battle to try to get Virgin America up and running,” Branson said on Wednesday, reflecting on the opposition he faced from competitors and regulators.
Several U.S.-based carriers and unions opposed Virgin America’s entrance on grounds that Branson would control the company in violation of a U.S. law that limits control of airlines to U.S. citizens. Virgin Group holds a minority stake in the company, which the law permits.
Transportation authorities also worried that Virgin America CEO Reid, a veteran U.S. and international airline executive, was too close to Branson and overseas interests and insisted he be replaced within months after Virgin America’s inaugural flight.
Good news or bad?
“(The) last thing needed now is another airline,” said Ray Neidl, an analyst at Calyon Securities. “(It) will have a negative effect on pricing.”
Others say the relatively small number of transcontinental and California routes Virgin America will serve are already highly competitive and in such demand that a few new daily flights will hardly dent other airlines.
Virgin America’s 19 daily U.S. flights represent a minuscule percentage of the air system’s 10.3 million annual departures.
“If you’re going to start an airline, right now may be the best time — everybody’s full and there’s limited ability to competitively respond,” said Mike Boyd, a consultant whose firm, The Boyd Group, is based in Evergreen, Colo. “I don’t think it’ll hurt anybody.”
Most at risk from Virgin America’s competition is JetBlue, the JFK-based low cost carrier from whose playbook Virgin America appears to be stealing a page with its trendy, plush styling and free in-flight television. Virgin America routes overlap about 10 percent of JetBlue’s network, said airline consultant Robert Mann, of R.W. Mann & Co. in Port Washington, N.Y.
JP Morgan Securities analyst Jamie Baker estimates as much as $220 million of JetBlue’s annual revenue, or about 9 percent of its $2.4 billion in annual sales, is at risk from Virgin America.
JetBlue spokesman Bryan Baldwin said the majority of JetBlue’s business is flying people from the Northeast to Florida — routes Virgin America has no announced plans to enter.
Neither JetBlue nor Virgin America offer the lowest fare on their shared routes. Northwest Airlines Corp. and ATA Holdings Corp.’s ATA Airlines both offer slightly cheaper flights, according to Web travel site Sidestep.com.
With Virgin’s bumpy regulatory ride behind it, the carrier is now focused on building its business with $44 one-way base fares between San Francisco and Los Angeles and $139 between San Francisco and New York. First class on the New York-San Francisco route is $389 one-way.
JetBlue, American Airlines and other rivals are competing on price, but JetBlue has no first-class seating and bigger airlines risk irritating frequent fliers — who relish upgrades — by filling their premium seats, especially at a discount.
Some industry experts believe Virgin America will capitalize on unprecedented customer dissatisfaction and trigger a service war, rather than a fare war.
“This is going to be a service leader,” said fare guru Terry Trippler, a Minneapolis-based consultant.
Trippler said Virgin America will automatically have an advantage on transcontinental flights simply because it is based in San Francisco — the city’s only major hometown airline. “They will get those originating passengers. That will give them a bump. It will give California a bump,” he said.
“We’d love to be able to fly most Americans to most major cities,” said Branson before the first flight, promising rapid expansion of the new airline, which he said would ultimately operate a fleet of 100 planes.
Reuters and The Associated Press contributed to this report.