CEO's Sir Richard Branson & Fred Reid Take Off On Virgin America
Monday, August 06, 2007JEFF YASTINE: A new discount airline is joining the quest for passengers and profits in the U.S. aviation business. Virgin America will launch service from its San Francisco hub on Wednesday. The carrier hopes to make its mark with low fares and high-tech creature comforts for passengers. British billionaire Sir Richard Branson founded Virgin America. But because of U.S. Federal airline ownership rules, has just a minority stake in the carrier and it's 75 percent owned by U.S. investors, has an American CEO and a separate U.S. board of directors. Sir Richard Branson and CEO Fred Reid join us now to talk more about Virgin America. Gentlemen, welcome to NIGHTLY BUSINESS REPORT.
SIR RICHARD BRANSON, CHAIRMAN & FOUNDER, VIRGIN GROUP: Thanks very much.
FRED REID, CEO, VIRGIN AMERICA: Thank you.
YASTINE: Sir Richard, we all know you've made your career and your fortune, certainly, in going up against big competitors and succeeding. But why does the United States airline market need yet another low-cost discount airline carrier?
BRANSON: Have you ever flown on any of the major carriers in the United States?
YASTINE: Certainly.
BRANSON: Well, that's why we need another carrier in America. I mean most businesses in America are very well run. When it comes to the airline industry, it is a abysmally run. They just haven't thought about the passengers, the consumer. And we managed it with Virgin Atlantic 21 years ago. I think we managed to create the best airline in the world. And I think the team at Virgin America will do the same here. Finally I think they will bring the glamour and the -- back into flying and actually make flying enjoyable again.
YASTINE: Maybe the better question then is how do you differentiate the service on Virgin America with what you can get on maybe the closest comparison would be like Jetblue?
BRANSON: Well, on Virgin you personally will have by far and away the best entertainment system flying. So brilliant entertainment system, fantastic seats, great -- great cabin crew. There are lots and lots of little things that we are doing on Virgin that you don't get anywhere else. For instance if you want to order your food, instead of waiting for the stewardess to company down or the steward to company down, you can just touch the screen or order it on the screen. If you want to chat to your children who may be sitting in a different part of the plane, you can chat to them actually on the screen. There are just lots of very nice little touches, that the overall affect, I think, will be winnable.
YASTINE: A question for your CEO Fred Reid, Mr. Reid you've worked at a number of airlines. And you know that eventually they will come gunning for you and try to match your fares, et cetera. How do you make sure that you keep your costs in line while at the same time fighting these eventual battles as far as fare wars go?
REID: Well, we feel very confident that our cost structure is sustainable at a very attractive, low rate for long, long time to come, indefinitely, actually. And we are already prepared for any amount of fare wars as you call them. But I think what the U.S. consumer is ready for and used to are attractive fares. The difference that we're making is that we are offering very, very attractive fares with a higher standard of service than is generally seen in this country. So we are very, very excited and the other thing I would add to this is of course we have a team that just loves what they do. And that is going to be a part of the magic of Virgin America as well.
YASTINE: How do you guard against those things that have made many other airlines run, things that you can't really control like fuel costs?
REID: Well, fuel cost affects all airlines equally except that if the airlines have a high cost structure and a complicated route network or a complicated scheduling structure like a hub, it's going to turn into a different -- a higher level of problem. When you have great technology, very young fleet as we do and very low fuel burn and very effective avionics which enables us to save money on the approaches and the takeoffs, we are going to be proportionately better off.
YASTINE: Sir Richard, I also had an additional question for you. Because of U.S. ownership rules, you are a minority investor in Virgin America. And I'm just wondering if it is perhaps a bit frustrating for you because you can't exert the same kind of control over operations or over the board of directors that you might otherwise as just a pure owner and an entrepreneur?
BRANSON: Well, I think all our fellow shareholders and all the staff are committed to the Virgin brand. That's, you know, why they joined in the first place. And you know we feel that we can trust them with the brand. You know they want to create the best airline in the world. They know that the only way that this airline is going to survive and thrive is to be the best. And that will be good for the brand. So you know, so in life you never get everything you want. But we are really excited and delighted that on Wednesday we will finally be, you know, here, Virgin America is here to stay and flying in America. And I think offering people in America real choice.
YASTINE: Sir Richard, appreciate you coming on the program and same for you, Mr. Fred Reid, appreciate it, as CEO...
REID: Thank you very much.
YASTINE: . of the new Virgin America, thank you very much.
REID: Thank you.
