=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2004/05= /25/BUGUN6R4PG1.DTL --------------------------------------------------------------------- Tuesday, May 25, 2004 (SF Chronicle) S.F., New York compete for Virgin USA/Founder says choice for fledgling air= line's home down to 2 cities George Raine, Chronicle Staff Writer Virgin USA, a discount airline being launched by British entrepreneur Richard Branson, may be getting closer to choosing its stateside home and San Francisco International Airport is still in the running. Branson told a Reuters reporter Monday that the choice had boiled down between New York and San Francisco. He also told a gathering of entrepreneurs that the firm would choose between Boeing and Airbus to outfit the airline in the next few days. Previously, Boston's Logan International Airport and Washington Dulles International Airport had also been under consideration by Virgin as possible U.S. headquarters. That could still be the case, as there was no formal announcement Monday, and the airline, which hopes to take off next year, exists only on paper. Regardless, San Francisco officials were pleased with any development th= at could help land the embryonic airline at SFO and provide an infusion of new jobs. "We would welcome them with open arms, and they know that," said Anne LeClair, president and chief executive of the San Mateo County Convention and Visitors Bureau. There has been an aggressive lobbying effort under way since September, led by the San Mateo County Economic Development Association, to lure Virgin. Gov. Arnold Schwarzenegger has personally pitched SFO to Branson -- they met on the set of the new movie "Around the World in 80 Days" -- and offered Virgin USA $18 million in state and local money to train airline workers. San Francisco Mayor Gavin Newsom gave a Virgin executive a half-case of his PlumpJack wine during a February walk-through of SFO, and there have been state and local incentives for lower property tax rates should Virgin establish its administrative headquarters and a maintenance facility at SFO. A Judy Garland impersonator sang "San Francisco" to entertain the Virgin executives at a February luncheon at SFO, and state Sen. Jackie Speier, D- Hillsborough, hosted a party at her home. "The mayor calls the Virgin executive all the time," said Newsom's press secretary Peter Ragone. "Mostly it's, 'What else can we do here? Any topics we need to cover?' " SFO in recent years has courted and won low-cost carriers such as AirTra= n, America West and ATA Airlines, after Oakland International Airport landed Southwest Airlines and JetBlue Airways. SFO is seeing a spike in travel after a long dry spell. Passengers at the airport in January numbered 2,277,880, a 1.8 percent increase over January 2003; in February, there were 2,154,224 passengers, a 10 percent increase over the previous February. In March, there were 2,577,227 passengers using the airport, a 12.5 percent increase over March 2003. Branson was in New York on Monday participating in an Entrepreneurship Summit, where, answering a question from a Reuters reporter, said the startup airline had narrowed its choices for a home to San Francisco and New York. Later Monday, Antonio Hofbauer, a spokesman for Virgin USA, said he had = no comment on the Reuters report and would neither confirm nor deny it. Both Bloomberg News and Reuters quoted Branson as saying it is still to = be decided whether airplanes will be purchased from Airbus SAS or Boeing Co. Branson said he will order from 30 to 40 plans. SFO believes that its former international terminal, Terminal 2, which h= as been idle for more than three years since it was replaced by the new terminal, would be a good fit for Virgin USA. There has been no economic impetus to develop the terminal since the Sept. 11 terrorist attacks and the downturn that followed, said Mike McCarron, an SFO spokesman. But travel numbers are up in an improving economy and another new discou= nt airline, Primairis, based in Las Vegas and awaiting Federal Aviation Administration certification, has been testing flights to and from SFO, said McCarron. Branson told Bloomberg News that the new airline, "should be under way in February" but that there had been delays, one being the selection of a chief executive. Branson's choice was Fred Reid, a former top executive at Delta Airlines. Virgin USA would be a low-cost carrier serving chiefly U.S. domestic routs. It would be 25 percent owned by Branson, the founder of Virgin Records and Virgin Megastores and Virgin Atlantic. Because he is a British citizen, Branson cannot own more than 49 percent of a U.S. airline or control more than 25 percent of its voting stock. Branson told Bloomberg he considers the cost of crude oil, and by extension jet fuel, horrible. He added, "I think airlines will absorb quite a lot of the costs, and some of the costs will be passed to the consumer. But the consumer can only bear so much." Nevertheless, airline industry analyst Morten Beyer, president and chief executive of Morton Beyer & Agnew in Arlington, Va., said he thinks the timing for another discount airline is ideal. "I've told him that for years," he said of conversations with Branson. Beyer said there is cheap labor and equipment to be had -- an available workforce that could be assembled with furloughed workers from the major carriers, while manufacturers are providing discounts of about 30 percent off list prices. "That's a pretty good discount and new airplanes are much more efficient fuel-wise and maintenance-wise than older ones," said Beyer. "Manufacturers are hungry, their orders are down, about half of what they were five years ago. The big guys are raising prices and so the low-cost carriers have a pretty big advantage," said Beyer. A fairly new entry into the discount market, Independence Air, the former Atlantic Coast Airlines, based at Washington Dulles, is offering fares that are 60 percent off those of major carriers, said Beyer. "Discount airlines always make sense," said Beyer. He also said he thinks San Francisco would be a prudent choice for Branson. "It's a big city, a traveling city, while New York is saturated with carriers." E-mail George Raine at graine@xxxxxxxxxxxxxxxx -------------------------= --------------------------------------------- Copyright 2004 SF Chronicle