Virgin America prepping for takeoff at SFO

June 26, 2007
Initial focus is on coast-to-coast service

BURLINGAME -- After waiting nearly three years for approval to launch a new airline, Virgin America chief Fred Reid isn't fretting about getting a late start on this year's summer travel season.

He's too busy getting the airline ready to fly, from meeting government requirements to making sure pilots have well-groomed eyebrows. Hiring and training employees is on the front burner for the Burlingame-based low-fare carrier. The airline also expects to get a waiver to begin selling tickets later this month for a likely August launch, and is busy shoring up the details for takeoff.

"Hey, we missed some opportunities, but now we just want to make the most of it," said Reid, chief executive of Virgin America and a former president of Delta Air Lines. "The delay means more people know about us, andwe're launching with a lot of brand recognition."

Some 75 new pilots, flight attendants and customer service reps were hired one day in early June, not long after the government approval to fly May 18. With that approval, Virgin America becomes the only major California-based airline in about 20 years. It aims to launch as a key player in the market for flights between the West Coast and East Coast. It will face significant competition at its San Francisco International Airport base from both low-fare carriers and legacy carriers such as United Airlines and American Airlines.

New employees rolled through an orientation earlier this month that included a catered barbecue, tours of the new Virgin airplanes and presentations on brand values and airline industry economics. In a large waiting room for new employees, there was a showing of the comedy "View from the Top," starring Gwyneth Paltrow as a flight attendant trying to get a job at a new airline.

There were plenty of laughs over the movie, and the mood of the newly-hired appeared upbeat and relaxed.

The second day of orientation was called "Spa Day" and included manicures, pedicures and free haircuts.

"We're hiring people for attitude, and encouraging them to bring their personality with them," said Todd Pawlowski, senior vice president of airports and guest services for Virgin America.

The initial orientation focused on the spirit of the airline and the importance of customer service, Pawlowski stressed. Complicated, technical training was left for later.

The airline's brand recognition is part of the reason Virgin America didn't take off earlier. The U.S. Department of Transportation and many U.S. legacy carriers were concerned about the foreign ownership interests of British billionaire Richard Branson. He owns a 25 percent stake in Virgin America and also owns Virgin Atlantic Airline, a successful carrier in the European market. Branson has also started record stores and music labels under the Virgin name.

With the green light to fly, there's no panic in the air at Virgin America's headquarters in Burlingame along Highway 101. People are focused, and the airline is busy complying with the Transportation Department requirements to assure that the airline is only 25 percent foreign-owned, a U.S. law.

Already, the Virgin America flair is coming to the surface.

For example, there were makeup people at the orientation. Some pilots were "getting their eyebrows done," said Frances Fiorillo, senior vice president of people and in-flight services.

There will be plenty of pizazz on board, too. A chat room for passengers who want to talk back and forth will be available on the airline's state-of-the-art entertainment systems.

Soft, elegant seats that perform massage, mood lighting, a cornucopia of music and movies, Internet access, and easy laptop plugins will also be available.

Virgin America will launch its first flight from SFO to New York City's John F. Kennedy Airport. Los Angeles, San Diego, Las Vegas and Washington, D.C., service is planned in the months ahead.

The airline aims to serve as many as 10 cities within a year of operation and up to 30 cities within five years of its launch. Some of those cities could include San Jose, Boston, Atlanta, Chicago, Dallas, New Orleans, Portland and Seattle.

"We're working feverishly, and there's a lot of anticipation among the new workers," said the energetic Reid, who will have to step down as Virgin America's CEO within six months of the May 18 launch approval date.

The carrier had already agreed to replace Reid after the Transportation Department expressed concerns that Reid's ties with Branson were too strong. After leaving, Reid can be a consultant for another three months with the airline. He said the search for his replacement had not yet begun.

But the weekly "Critical Path" meetings have begun in earnest. They bring together top executives to discuss progress and stumbling blocks on everything from airline modification to new hires, background checks, government requirements and the start of ticket sales.

When the government waiver to sell tickets comes through, Virgin America will put 1 million seats on sale for flights over the next four or five months. Takeoff will come within 35 to 50 days of the waiver, Reid said.

"A big question is how different the product will be compared to the competition," said Doug Abbey, an airline consultant with the Velocity Group.

Major carriers are likely to match Virgin America's projected low fares -- at least at first, he said. There also will be plenty of competition from discount carriers.

Indeed, things have changed dramatically at SFO since Virgin America first targeted the airport as its base. SFO was one of the more expensive airports around at the time, dominated by legacy carriers such as United, which operates half of SFO's flights. Low-fare carriers were not nearly as plentiful back then as they are today at SFO.

When it became clear that Virgin America would get government approval to fly, discount king Southwest Airlines immediately announced it would return to SFO. That was after leaving SFO in 2001 over airport costs and delay issues to beef up its operations at Oakland International Airport, where airline costs are lower.

Initially, Southwest said it would begin service in the fall. But it pushed that up to August just before Virgin America's final approval to launch. The other major discounter, JetBlue Airways, kicked off its SFO service in May.

That didn't surprise Reid. He knew they were coming.

The growth of low-fare carriers is inevitable, Reid said. In the early '90s, legacy carriers like United, Delta and American carried 95 percent of airline travelers in the U.S. By 2000, low-fare carriers like Southwest had 15 percent of the market, according to Reid. Now they carry nearly one-third of U.S. passengers, he added, and that's likely to go to 50 percent in the not-too-distant future.

"Southwest and JetBlue don't trouble me," said Reid, who looks trim and exudes confidence. "We're going to create new traffic and win loyal passengers."

Abbey thinks Virgin America will "raise the bar in customer experience."

"They have to hit with a big splash," he said.

"The market they're coming into is vastly different than 2 1/2 years ago," said Ronald Kuhlmann, airline analyst with Unisys, an airline consulting firm in Pleasanton. "What would have been a niche spot is not there. They clearly must differentiate themselves."

Virgin America expects to lure customers with the low fares, comfortable seats, mood lighting and over-the-top entertainment and Internet choices. There will also be unique food offerings for purchase on the plane.

But there's also serious attention to basics, like having clean airplanes, landing and taking off on time, and having a fast turnaround, Reid said.

"I'm aware of the pitfalls of coming in with sexy looks," Reid said. "If you have great TV channels, great food, a cool Web site, mood lighting -- all that is not good enough unless the basics are right, and we're sober about that."

Travelers looking for low fares appear to embrace Virgin America, and are likely to give it a try.

"When I travel I want the best deal, with the most service and quality for the money," said Eric Doyle, a Menlo Park engineer who just made a weekend trip to Seattle. "I like having more low-fare choices, and I like it that they're going to have a business class available."

To make sure its home base is in order, the airline is meeting frequently with SFO officials, negotiating the airport lease, developing emergency plans, establishing where to fuel airplanes, where maintenance will be done and other procedural items.

"There's a thick book of questions," said SFO spokesman Mike McCarron. "We're going through it page by page."

The recent hires have pushed Virgin America's employee roster up to 325 people. The company will go to 450 by the launch later this summer, Fiorillo said. From there the airline plans to continue its hiring spree, boosting its Bay Area employee base to 1,000 by the end of the calendar year and adding another 1,000 employees in its second year of operation.

"It's a challenge hiring the right people," Fiorillo said.

"It'll be a challenge, period," said Adam Pilarski, senior vice president of airline consulting firm Avitas and author of the new book "Why Can't We Make Money in Aviation."

"It's a sexy industry with a lot of glamour, but it's not easy to make money," Pilarski said. "Others will want to kill the competition, and Virgin America will have their hardships ahead of them."

Pilarski called Southwest and JetBlue "dangerous competition." But he thinks all the competition, including the legacy airlines, are afraid of the Virgin brand.

"This isn't California Air," he joked, pulling a random name out of the air. "Virgin is an established name."

He pointed out that Virgin America's investors have shown a lot of patience, "because they're aware of the potential success." The investors, Cyrus Capital Partners and Black Canyon Capital, initially raised $177 million for the company, and endured the delays as the airline launch dragged on.

But Pilarski warned that "people have to show up, the planes have to work and fly on time, service has to be friendly, and you don't lose the baggage."

"You can't only be exciting, you have to do the boring stuff, too," he added.

In its favor, Virgin America likely won't have to face a crippling attack from the legacy carriers, Kuhlmann said. Those carriers are not going to push more seats on the market at discount prices or triple frequent-flyer mileage to lure passengers, he noted.

"Legacy carriers are cutting back domestic capacity. They're focused on making money and not just going after the lowest-fare customer," he said. "If Virgin America hits a nerve and resonates with customers, they'll be OK. But if they deliver the same old thing, it will be hard."

News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.