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Virgin America gets off ground
Question of the Day
NEW YORK (AP) — Just as major airlines are beginning to return to profitability after cutting capacity to lower costs and boost profits, Virgin America entered the fray yesterday.
Virgin America’s inaugural flights, which could mark the beginning of stiffer price competition, will link its San Francisco hub with New York’s John F. Kennedy International Airport and Los Angeles.
The new carrier got a taste of the challenges other airlines face when its first flight out of Kennedy Airport was delayed because of the severe storms that hit New York yesterday morning. Airport officials said the storms caused flight delays of up to 90 minutes and much worse ground delays.
Virgin America’s scheduled 10 a.m. flight lifted off about 10:50, said spokesman Gareth Edmondson-Jones. On board were billionaire Richard Branson and Chief Executive Officer Fred Reid, who was late arriving at the airport.
Comedian Stephen Colbert, scheduled to attend a ceremony at the airport, didn’t make it.
“He was in a car for 4½ hours and turned around in the end,” Mr. Edmondson-Jones said.
The airline, a brainchild of Mr. Branson, plans to add direct New York-to-Los Angeles flights beginning Aug. 29 and more routes later this year, including service between Washington’s Dulles International Airport and the West Coast. It will also fly into Las Vegas.
Virgin America is offering round-trip fares of $278 between New York and the West Coast. First-class round trips start at $778. Some airlines, including JetBlue Airways Corp., have already been forced to match Virgin America’s economy fares, while other airlines are offering even cheaper fares.
“[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 not announced plans to enter.
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