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Thu, Jun 10, 2004

Virgin Says US Spin-Off Will Be All-American

And Won't Be Built On The Back Of A Struggling Carrier

Virgin USA won't be built on the back of a broken US airline. In fact, Virgin's new American chief, former Delta President Fred Reid, says it will be built from the ground up and will be All-American.

The new venture, set to launch next year, is now looking for financial backing in an environment that makes most investors reach into their medicine cabinets for nerve tonic.

"It is a difficult atmosphere, and it will be a difficult atmosphere," Reid acknowledged in an interview with the New York Times.

"It is anyone's guess what the structure of the airline industry will be" when Virgin's US operation begins service, he said. "This is an industry that is going through upheaval, and upheaval always presents opportunities to innovative and smart companies."

It's the kind of talk that makes you want to forego the sugar you normally eat with your bullets for breakfast. "We are coming in with a brand proposal and a brand culture that is very, very well known in highly competitive industries," Reid told the Times.

But face it, a lot of industry know-it-alls think Virgin is looney for trying to start a new American operation in the midst of all that upheaval.

Over the weekend, Virgin announced the hub for its as-yet-to-be-named airline will be SFO in San Francisco (CA). Its corporate headquarters will be in New York.

Because federal law prohibits any foreign company from owning a majority share of an airline's stock, Reid said the new company will be a licensee of Virgin rather than a subsidiary. While the new chief wouldn't name any of the investors Virgin is courting, he did say that the new operation won't take on a struggling US carrier as its partner.

"This carrier is going to be red, white and blue and born in the USA. We are not going to start it out of the shell of another carrier," he told the Times.

FMI: www.virgin.com

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