Just in time for Christmas, there is a virgin birth, of sorts.
After more than a year of road shows with investors, and after months of "news any day now", followed by pregnant pauses, Virgin America has come up with real money, or at least real vows of money, to start founder Richard Branson's long-promised US airline.
With $177.3 million committed to its start-up, Virgin America would be the most strongly capitalised US launch ever, with deeper pockets than a 1999 venture known as New Air until it changed its name to JetBlue. Of the total, $90 million is from VAI Partners, a US investment group funded by Black Canyon Capital and Cyrus Capital Partners. The two investment funds are run by veterans of large Wall Street firms, including the defunct Drexel Burnham Lambert. About $30 million of the total comes from companies owned by Branson. The rest is debt held by Virgin companies.
Virgin America chief executive Fred Reid insisted that the capital structure fully complies with US rules on foreign investment in air carriers and stressed that the Virgin America application was unrelated to proposed changes in Transportation Department rules on ownership and control. Speaking from his car-phone on a warm California afternoon, the former Delta executive said, "This is something we have been working on for a long time. It just took longer than we thought."
With the funding committed, Virgin should have 17 new A319s and A320s flying within its first year. Virgin would name only one route, an unspecified New York airport to San Francisco, where it would use SFO, the San Francisco International Airport that is now its corporate base as well as its flight centre. It had earlier planned on a separate corporate headquarters in New York City. Reid did not explain the change but said, "With our plan, our business model and this funding, we'll be profitable with oil at almost any cost. We're building an airline people are going to love".