SFO Rolls Out Red Carpet to Woo New Virgin USA

SFO Rolls Out Red Carpet to Woo New Virgin USA 
San Francisco Chronicle, CA

Wednesday, February 11, 2004

  

Cheerleaders, divas, drag queens, skateboarders and
politicos spent the past two days trying to entice
fledgling airline Virgin USA to put its headquarters
in the Bay Area. 

San Francisco International Airport, which has
suffered a steep drop in passenger traffic from the
dot-com implosion, post-Sept. 11 fear of flying and
SARS, is vying with Boston's Logan and Washington's
Dulles airports for the nascent carrier's affections. 

Virgin USA is expected to make a decision at the end
of this month. 

At present, Virgin USA is a virtual airline. The
brainchild of British entrepreneur Sir Richard
Branson, it does not yet have the required U.S.
majority owner required by U.S. law. Nor does it have
any aircraft or a flight schedule. 

But Virgin does have the potential to generate upward
of 2,000 Bay Area jobs, according to the airline's
officials. 

The proposed headquarters, which is scheduled to be an
administrative and maintenance center, may also be key
to renovating and reopening SFO's Terminal 2. Airport
Director John Martin said it would be a perfect fit
for Virgin USA, which is intended to be a low-cost
carrier flying domestic routes. Reopening the
terminal, now closed for lack of money and air
traffic, needs to be a market-supported decision, he
added. 

SFO has courted and won low-cost carriers such as
AirTran, America West and ATA Airlines of late, after
Oakland International Airport landed Southwest
Airlines and JetBlue Airways. Virgin USA would in
theory be a robust low-cost carrier that would get SFO
a bigger share of that fast-growing market. 

Surrounded by the likes of San Francisco Mayor Gavin
Newsom, Gap Chief Executive Officer Paul Pressler and
venture capitalist Ann Winblad at a Monday night party
in the home of state Sen. Jackie Speier,
D-Hillsborough, Virgin USA's CEO, Frances Farrow,
indicated that dollars and cents, in addition to the
intangibles, will drive the airline's decision. 

"Quality facilities, cost of living for our employees,
operating expenses and quality of life are all
important,'' Farrow said. "Personally, I would love to
live here,'' she said, smiling as a "Beach Blanket
Babylon'' cast member wearing an enormous hat strolled
by in Speier's sunken living room. 

"We are not looking for a hub,'' Farrow said. "We are
looking for a place to put our administrative
headquarters, train staff and do maintenance.'' 

In addition, Virgin would operate flights out of SFO,
initially from the International Terminal and, in
time, shuttered Terminal 2. 

Newsom said he is helping to woo Virgin because he
places "a high priority on it. I strongly believe that
San Francisco and the region are a good fit for the
Virgin brand, which is an exciting, cutting-edge
brand.'' 

The mayor took part in a closed-door marketing pitch
to the Virgin team and gave Farrow a sampler package
of his PlumpJack wine just before the meeting. 

Farrow's team of seven senior executives visited
Boston last week. 

Boston city officials won't reveal very many details
of their pitch. But it includes an offer of cheap
office space in two buildings within a federal
empowerment zone along the waterfront south and east
of Boston's downtown. 

Virgin could receive annual federal tax credits of
$3,000 for each employee who lived and worked in the
zone, said Susan Elsbree, spokeswoman for the Boston
Redevelopment Authority. 

The buildings also face Logan Airport across a narrow
stretch of Boston's harbor, a point the city
highlighted with Virgin executives. 

"You can throw a baseball at Logan," Elsbree said. "We
took them there and did the whole thing. We pointed at
the planes and said, 'Those could be your planes.' " 

Like Logan, Dulles has the space for a young airline.
The airport recently built two new concourses, is
adding a traffic control tower and is conducting
environmental studies for a new runway, said Tara
Hamilton, spokeswoman for the Metropolitan Washington
Airports Authority. 

Bay Area authorities and SFO officials were mum about
what they are offering. After lunching on sushi and
dim sum in SFO's handsome Aviation Museum, Newsom,
Martin and other officials adjourned to a back room
for some hardball negotiating with Virgin executives. 

However, at the request of SFO officials, the San
Mateo County Economic Development Association
indicated it has led the pitch to Virgin USA since
September. 

SAMCEDA President Deberah Bringelson declined to
discuss details of the incentive package offered to
Virgin USA, but she did say that it includes employee
training and real estate opportunities. 

Bringelson isn't talking about just any old training,
though. Besides offering Virgin USA the nation's most
educated workforce -- the Bay Area has more college
grads per capita than anywhere else -- she said that
the airline executives specifically asked whether
their employees would have opportunities to learn
performance art and other ways to entertain their
passengers. 

That explains why SFO arranged for so much colorful
entertainment Tuesday, starting in the morning when
the Virgin USA representatives left their hotel and
found ballet dancers awaiting them outside. Later,
there was the Stanford chorus and a tap dance troupe. 

Virgin USA's request for this kind of employee
training is not unusual from a young, edgy company
that offers a festive atmosphere on flights and a
belly-up bar for business-class passengers. 

Some airline industry analysts wondered whether SFO
could offer enough to entice Virgin, which would be an
independent spin-off of Branson's international
carrier, Virgin Atlantic Airways. 

"I'll put this as delicately as possible, but I think
Grand Island, Neb., has a better chance than San
Francisco,'' said Michael Boyd, principal of the Boyd
Group aviation consulting firm. 

Boyd said the airport's stiff fees, among the highest
in the nation, as well as its difficult climate, would
pose trouble for a low-cost startup airline,
complicating its finances and its schedule. 

"The weather that everyone loves when they're sipping
Irish coffee and looking at the pier -- it doesn't
work so well for air traffic control,'' Boyd said. 

Long plagued by delays due to rain, wind and fog,
low-fare leader Southwest Airlines left SFO in January
2002 because it could not get its flights out on time.


SFO also has faced more financial difficulties than
its competitors, said Kurt Forsgren, a director at the
Standard & Poor's research firm. 

Dulles, Logan and SFO all saw their credit ratings cut
after the Sept. 11, 2001, terrorist attacks, which
prompted tourists and business travelers to cancel
their plans. But Logan and Dulles both rate higher
than SFO, with A- plus ratings instead of SFO's A,
Forsgren said. 

"Financially, SFO is certainly the most stressed in
terms of costs and debt levels, which will certainly
be a consideration in the ultimate decision, '' he
said. 

Competing for airline business may well become more
frequent for SFO. In October, the airport hired a San
Francisco marketing and advertising firm, the M-line,
to come up with a strategic marketing plan for SFO. 

The M-line recruited a team of cheerleaders from Bay
Area high schools to greet the Virgin executives and
positioned skateboarders, surfers and a drag queen
draped in red -- the Virgin Atlantic color -- around
the airport as part of SFO's charm offensive. 

"We realize the airport needs to be a more responsive
partner with its airline tenants,'' said Jane
Sullivan, the airport's marketing manager. 

 

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