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Branson Starts Virgin America, a Low-fair US Airline

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Travel Agency (AXcess News) New York - Virgin Atlantic founder Richard Branson announced the startup of "Virgin America" this week, a low-cost airlines that will fly coast-to-coast Branson said.

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Last Minute Travel Branson's Virgin Americafiled its application with the Department of Transportation to fly as a U.S. carrier on Thursday. Branson said Virgin Americaalso secured $177.3 million for its initial start-up costs.

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Aloha Airlines Black Canyon Capital and Cyrus Capital Partners funded $90 million of Virgin America's initial capitalization through VAI Partners, a U.S. investment group it formed for Branson's deal. Branson put up $30 million and the balance is being funded in the form of debt by Virgin companies.

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Travel Agent Branson holds a minority stake as aforeigner while VAI controls operations. The ownership had to be structured that way in order to comply to U.S. Department of Transportation rules.

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Travel Agents Virgin America said in its initial DOT filings that it intended to fly from San Francisco to New York, though no specific details on its route was included in that DOT application.

Discount Airfares Virgin America plans to fly 17 Airbus jetliners in the U.S. within a year and employ approximately 2,000 workers nationwide. Branson's ease of entering the US market may fare better if Virgin America was going to fly Boeing planes instead, though there is no law that would require the low-fare airline to use US-built airplanes.

Travel Deals Branson had invested in an Australian airlines last year and his UK-based Virgin Airlines would give the English millionaire a way to connect flights to both destinations from Sam Francisco and New York, which may have been a determining factor in his pitch to VAI Partners.

Air Fares In the US, major airlines have been struggling with high fuel costs and labor issues, while discount carriers here, like Southwest Airlines (NYSE: LUV), JetBlue Airways (Nasdaq: JBLU) and AiTran Holdings (NYSE: AAI), are prospering.

Travel Insurance Data by Back Aviation Solutions shows that discount airlines have 29 percent of the seats while in 2000 they only had 19 percent. The gain supports Branson's move into the US airline market in a big way and as long as Virgin Airlines faces lower jet fuel costs the only other obstacle is competition itself.

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