Officials Wait to See if San Francisco Bay Area Swept Virgin Off Its Feet

February 19, 2004

Officials Wait to See if Bay Area Swept Virgin Off Its
Feet
San Francisco Business Times, CA


Bay Area officials are holding out a package of
goodies to tempt British magnate Richard Branson to
base his upstart low-cost airline near San Francisco
airport rather than on the East Coast. 

The incentives were rolled out this week as Virgin USA
airline officials met in San Francisco with airport
executives, economic development officials and a range
of business and political leaders. 

Airport and economic development officials responsible
for presenting the package wouldn't provide details,
but sources familiar with the offer said incentives
being discussed include: 

Creation of an enterprise zone centered at San
Francisco International Airport, which would help
Virgin qualify for various tax breaks. 
State money for job-training programs. 
First-time home buyer assistance to address the
airline's concern over Bay Area housing costs. 
Use of SFO's old international terminal for Virgin USA
flights. The terminal was scheduled for renovation but
that project was delayed due to lack of money. 
San Francisco International Airport is one of three
sites being considered for the Virgin USA's
headquarters. The new airline, which plans to start
flying by 2005, could house some 500 people at its
base. The two other airports being considered are
Boston's Logan International Airport and Washington,
D.C.'s Dulles International Airport. 

Virgin USA officials said they might make their final
decision this month. But they left open the
possibility that they could take longer. The visit to
San Francisco followed a similar trip to Boston; a
mission to the Washington, D.C., area is planned. 

Airport director John Martin, other SFO executives and
economic development officials all declined to detail
what incentives are being offered to Virgin, saying
they didn't want to tip off competing cities. 

"What happens is we say what we're considering and
then (competitors) ratchet it up," said Deberah
Bringelson, president of Samceda, the San Mateo County
business development group heading up the pitch for
Virgin USA. 

But local officials involved in the negotiations said
that a variety of incentives have been discussed. 

For example, Virgin could take advantage of several
million dollars in state job training money. That
could be important to an airline company that needs to
keep pilots and other employees up to date on the
latest technology or procedures. 

Virgin officials are said to be concerned about the
Bay Area's high cost of housing. Two elected officials
said they could work with Virgin on ways for the
airline's employees to take advantage of first-time
home buyer programs. 

Staffers for California Sen. Jackie Speier and
Assemblyman Gene Mullin, both Democrats representing
districts that include SFO, said they would support
legislation to create an enterprise zone near SFO to
help Virgin. An enterprise zone, which can be created
by state lawmakers, is intended to encourage business
investment and job creation in a particular area. The
zones can involve hiring tax credits, sales tax
credits and other breaks. 

Virgin USA said it needs at least 75,000 square feet
of office space for its new headquarters. SFO
officials have said that they could accommodate that
on airport grounds with future construction. 

Officials in Boston and Washington, D.C., are expected
to include incentives as part of their final pitches
as well. In Boston, for example, Virgin has been
offered roughly 66,000 square feet of discounted
first-class office space in a downtown office building
with views of the Boston Harbor and Logan. Space in
that building is said to rent in the high
$20-per-square-foot range. A Boston source said the
offer also included job-training incentives. 

Virgin officials said their decision will be based on
many factors, including incentives. Todd Pawlowski,
who is leading the airline's headquarters search, said
the company will also consider issues such as the
availability of local employees, geographic proximity
to major air routes and general business costs. 

"It really is a complex decision," said Pawlowski. "At
the end of the day it comes down to a gut decision of
what makes sense." Virgin's executives, he said, will
balance "intellect with instinct." 

The Bay Area's pitch for Virgin has reached into the
governor's office. Gov. Arnold Schwarzenegger has
worked the phones and sent emissaries to lobby
maverick businessman Branson to place Virgin USA's
office in California. Before the governor's
involvement, Virgin had largely ruled out California
due to its high cost and "erratic" business and
political climate, Bringelson said. 

New San Francisco Mayor Gavin Newsom has also been
involved in lobbying Virgin officials. 

SFO executives said landing Virgin USA's headquarters
would help boost business at a facility that saw a
drop-off in flight traffic beginning in 2000. SFO, the
region's major international flight hub, has been
trying of late to attract low-cost carriers, such as
Virgin USA, to round out its flight options. 


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