- The Washington Times - Wednesday, March 3, 2004

Washington Dulles International Airport is a top candidate to become the U.S. headquarters for a new airline owned by Virgin Group.

The British-based company plans to announce a choice soon for its subsidiary airline, which would operate as a low-fare carrier within the United States.

“The only information I can provide you at this point is that we are hopeful to make our headquarters decision in a matter of weeks,” said Todd Pawlowski, who is coordinating the airline headquarters search for Virgin USA, the parent company’s U.S. subsidiary.

Dulles Airport is competing with airports in Boston and San Francisco, according to Virgin USA officials.

The final choice by Virgin Group is expected to generate more than 1,000 jobs initially for the city that hosts the airline.

Unlike Boston and San Francisco, Northern Virginia’s appeal to Virgin USA has been made behind closed doors.

“We do not discuss confidential projects,” said Jill Lawrence Vaughan, spokeswoman for the Virginia Economic Development Partnership, the state’s economic development authority.

The Metropolitan Washington Airports Authority, which manages Dulles Airport and Ronald Reagan Washington National Airport, is participating in the effort to bring Virgin USA to Dulles Airport.

Boston and San Francisco city officials put together bid packages that include tax incentives, job training and measures to reduce housing costs.

Dulles Airport offers “facilities and growth opportunities” that other airports lack, said Tara Hamilton, airports authority spokeswoman.

“We strongly believe that the Washington metropolitan region and Dulles Airport offer tremendous opportunities for this new airline,” she said.

The Washington area offers “a very large population base, lack of major low-cost-carrier presence, high incomes and strong demographics for a good revenue environment,” said Darryl Jenkins, an airline industry consultant.

However, any new airline based at Dulles Airport should expect “major competition with a large aircraft base already established,” Mr. Jenkins said.

Virgin USA plans to start flights with its new airline by 2005 and gradually increase its number of employees.

It is searching for U.S. investors to buy 51 percent of the company. Federal law forbids foreign companies from owning more than 49 percent of a U.S.-based airline.

The prospect of foreign owners taking over some of the market of U.S. airlines has angered labor unions, which are concerned about job losses.

“The introduction into the U.S. market of a low-cost carrier owned and controlled by foreign interests stands to undermine a critical U.S. industry that has been a major engine of job creation in this country,” the Transportation Trades Department, AFL-CIO, said in a letter last month to Sen. Barbara Boxer, California Democrat.

The venture appears to be an attempt by Virgin Group Chairman Richard Branson to regain a lost opportunity.

Eight years ago, Mr. Branson turned down an offer by JetBlue Airways to participate in starting up the airline. Since then, the airline has become one of the nation’s most successful low-fare carriers.

Such carriers operate 22 percent of U.S. domestic flights. Their simplified business models have allowed them to increase their share of the airline market in recent years.

However, the competition has become fiercer.

The decline in market for the network carriers, such as American Airlines and Delta Air Lines, has stabilized. In addition, Independence Air, a low-fare carrier based at Dulles, plans to begin flights this summer, mostly to tourist destinations like Florida and Las Vegas.

As a result, airline industry analysts say Mr. Branson will have greater difficulty competing in the United States than he would if he had participated in the start-up of JetBlue Airways.

“There’s a limit to how far this low-fare discount model can work,” said Michael Boyd, president of the Boyd Group, a Colorado aviation consulting firm. “I don’t know where Branson is going to go.”

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