Virgin plans new US airline

Branson keen to spread wings across American domestic market

Richard Branson will launch a US version of his Virgin Express short-haul low-cost European service early next year if the Government can negotiate an open skies agreement giving British carriers the right to serve the American domestic market.

"We could have an operation up and running by the start of next year," Mr Branson said. "The only hold-back would be equipment. We would not want to buy new planes at the top of the market."

Under the current aviation agreement between the US and the UK ,British carriers are forbidden from transporting passengers travelling between two points in the US.

Negotiations over a new open skies agreement are deadlocked. They have been complicated by the US condition that it will only grant anti-trust immunity to the proposed alliance between British Airways and American Airlines if an open skies deal is agreed.

Virgin is pressing the Government to ignore pressure to settle for a weak US-style open skies agreement, which would secure anti-trust immunity for BA but still restrict other British carriers' ability to compete on equal terms with their US rivals. "Let's open up the market completely," Mr Branson said. "Let's tear down all the protectionist barriers on both sides of the Atlantic."

Branson's commitment to set up a Virgin Express operation in the US answers criticisms that that the Government, in demanding access to the US domestic market, is seeking a right that no British carrier will ever exercise.

"Once we are given the go-ahead we will definitely get on with it," he said.

Initially Virgin Express would avoid direct confrontation with Southwest Airlines, the US's most successful low-cost carrier. At first, Virgin would concentrate on linking airports such as New York and Los Angeles that are are already served by Virgin Atlantic international flights.

Mr Branson is confident that the funds will be readily available to start a new British-owned American airline from scratch, using US personnel and new aircraft.

"The Virgin name is so strong that we can find backers to fund 100 per cent of any expansion while we will still be able to keep majority control," he said.

The company has considerable financial strength. Virgin Express has pounds 40m in the bank and Virgin Atlantic is throwing off cash. The combined annualised turnover of the two airlines is pounds 1bn, with profits of pounds 90m.

In Europe, Virgin Express is expanding rapidly, with fares up to 75 per cent cheaper than offered by national flag carriers. Last week, it added Madrid, Rome and Copenhagen to a network serving over 100 destinations in a mix of charter and scheduled routes.