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Virgin America Gears Up for Debut

Virgin America will finally take off Wednesday, three years after the start-up carrier unveiled its initial operating plan.

A lot has changed in that time. Most importantly, Virgin's base, San Francisco International Airport, welcomed two low-cost rivals. JetBlue (JBLU - Get Report) began flying from there to New York's Kennedy Airport in May, and Southwest (LUV - Get Report) will begin flying Aug. 26 to Chicago, San Diego and Las Vegas.

Meanwhile, a succession of bankruptcies caused costs to plummet at the legacy carriers that fly many of the trans-continental routes being targeted by Virgin America. Costly flight delays surged at the major airports Virgin wants to serve. And the Transportation Department ruled earlier this year that Virgin CEO Fred Reid must leave his post six months after the airline starts flying.

Virgin announced its name, its order for Airbus jets and the basics of an operating plan in June 2004. It applied to the DOT in December 2005, triggering objections from U.S. carriers and labor unions.

This past May, after continuing adjustments by Virgin, the agency mandated various additional changes -- including Reid's departure -- to ensure that Virgin's relationship with U.K.-based Virgin Group and its chairman, Richard Branson, does not violate requirements mandating that U.S. citizens control U.S. airlines.

Reid says Virgin has not been deterred, but instead has adapted. "We're not as [transcontinental]-centric as we were thinking two or three years ago," he said in a recent interview. "The way things will look now will be a little different."

The 57-year-old sounds resigned to his departure. "Nobody expected the cards to fall that way," he says. "It's bizarre, but if that's what it takes to get this off the ground, I will try not to take it personally."

On Wednesday, the carrier will inaugurate service from San Francisco to New York and L.A., as it begins to implement a strategy of establishing itself at major airports and then filling in the gaps. On Aug. 29, it will begin New York-Los Angeles flights. It will add San Francisco-Washington Dulles on Sept. 26, San Francisco-Las Vegas on Oct. 10, and Los Angeles-Dulles on Oct. 24.
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