=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/2004/06= /07/BAGL471TIM1.DTL --------------------------------------------------------------------- Monday, June 7, 2004 (SF Chronicle) S.F. AIRPORT/Panache, incentives helped lure new airline David Armstrong, Chronicle Staff Writer Star power, close coordination between government and business, and relatively cheap commercial real estate each played a part in persuading a startup airline backed by British entrepreneur Richard Branson to choose San Francisco International Airport for its operational headquarters. The as yet unnamed, low-fare domestic airline is the brainchild of Branson, the majority owner of Virgin Group, which operates international carrier Virgin Atlantic Airways. The new, U.S.-based airline, in which Branson will hold a minority interest, plans to start flying next year after it secures financing. Officials at the airline said it will hire up to 1,500 people in the Bay Area and 300 in New York, where it will set up an administrative headquarters. The company, headed by recently hired former Delta Air Lines executive Frederick Reid, was much sought after as a source of jobs and business cachet. Boston, Washington, D.C., and New York bid for the carrier, which will incorporate the Virgin brand in its name to cash in on the cool, brash image of Virgin and Branson. "We got five times the number of jobs (as New York)," said San Francisco Mayor Gavin Newsom, who played an active role in wooing the airline. "We have the heart and soul of the operation, the core of the operation that's due to grow." SFO won out with a combination of cash incentives and cultural "soft power," said Virgin spokeswoman Stacy Geagan. "As a Virgin-branded airline, we liked that kind of showmanship. But at the end of the day, the decision involves significant investment and significant dollars. And although residential real estate is very expensive in your area, we found quite reasonable rates for the commercial real estate we require." Moreover, California and San Francisco offered Virgin more than $15 million in state and local employment training grants, cooperative marketing and other incentives. The Bay Area's bid started late last year when Gov. Arnold Schwarzenegger telephoned Branson and personally lobbied for California. Then, Schwarzenegger directed the state labor department to free up employment training funds for Virgin, streamlined the permit process and asked the California Commission for Jobs and Economic Growth to coordinate the state's bid. The commission, according to Executive Director Mark Mosher, acts as "the governor's marketing department." The bid also attracted pro bono work by the San Francisco architectural firm Heller Manus, which drew up plans for an office building and flight simulator facility in Millbrae, according to David Crane, a special adviser to the governor on jobs and economic growth. The effort also pulled in San Francisco investment banker Peter Luchetti, who presented costing models to Virgin executives and helped coordinate the dollars and cents side of the bid, Crane said. The San Mateo County Economic Development Association pitched the benefi= ts of dipping into the large pool of experienced airline workers who had been laid off during the economic downturn and cost-cutting efforts by existing airlines. Back in February, Newsom welcomed executives from Virgin USA, which runs Branson's American companies, to SFO. He made a marketing pitch and co-hosted a lunch at the airport, where the Virgin team was greeted in the lobby by a bevy of teenage cheerleaders wearing red, the trademark color of the Virgin group. That same night, representatives from San Mateo County, the state, the airport and the city mounted a charm offensive for Virgin executives by throwing a cocktail party at the home of state Sen. Jackie Speier (D- Hillsborough). "I've only been in elective office for eight years, but this was the most unique collaboration between business and government I have seen," Newsom said. Newsom and Supervisor Aaron Peskin -- who had been at political odds with Newsom and was then head of the board's Finance Committee -- rode to Speier's party together "to present a united front," Crane said. It worked. "The community input, with the state, county, city and airport all pulli= ng together, was impressive," Geagan said. Plus, she added, Virgin executives liked the Bay Area's "openness, eclecticism and creativity. We will be hiring a lot of people from this community, and that's the attitude that is associated with the Virgin brand worldwide." More pragmatically, having one branch of the airline on the West Coast a= nd another on the East Coast, both in major tourist markets, will help the company build its national route structure, she said. The bid succeeded in spite of the widespread perception that California and the Bay Area are anti-business, Geagan said. "In the beginning, people might have thought that. But we found the city and state very open to business. They do have an issue with reputation management." The deal is something of a coup for SFO, which has been hit hard by the high-tech slump, the war in Iraq and post-Sept. 11 fear of flying. "We're thrilled," said Airport Director John Martin. "We have got the capacity in the international terminal to get them up and running early next year. We see very rapid growth, great service and lower fares. Virgin is a perfect fit for San Francisco, a cutting-edge city." E-mail David Armstrong at davidarmstrong@xxxxxxxxxxxxxxxx --------------= -------------------------------------------------------- Copyright 2004 SF Chronicle