Don Carty's New Start

AMR's ex-CEO, named chairman at Virgin America, is ready to help the start-up take flight.
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Former

AMR

(AMR)

chief executive Don Carty was tapped this week for a key role at an ambitious new carrier with ties to British billionaire Richard Branson, and he said he's not put off by the prospect of a little transcontinental competition with his former employer.

"Some of what we will do will overlap with some of what they do," Carty, the newly named chairman of

Virgin America

, said in an interview Wednesday. "But our ambition is not to replace a carrier the size of American Airlines. They're enormously competent guys

and obviously a company that has demonstrated itself among the legacy carriers as the cream of the crop."

Carty, 59, spent 24 years at American, including five as CEO. He joins former

Delta Airlines

(DALRQ)

president Fred Reid, now Virgin America's CEO, in an effort by Virgin Atlantic founder Branson to establish a U.S. affiliate.

U.S. law currently requires that foreigners be restricted to 49% ownership and that they not exercise control over domestic carriers. However, the Transportation Department is seeking to relax the restrictions on control.

Virgin America is seeking DOT approval to begin service this year from a San Francisco base. It has said its first flight will likely be between San Francisco and New York's Kennedy International Airport -- a market where American offers five daily round-trips. American currently has 39 daily transcontinental flights, including 11 between Kennedy and Los Angeles.

JetBlue

(JBLU) - Get Report

, which has 54% of its capacity in cross-country markets, operates five daily flights between Oakland and Kennedy.

Still, Carty insisted there is room in the market for a newcomer, noting that San Francisco fares are far higher than Oakland fares and that many passengers still fly transcontinental with one-stop connecting service through the hub of a major airline.

"There's a lot of hub capacity coming out of the market," Carty said. "With capacity shrinking, it creates a lot of opportunities."

Carty is Virgin America's nonexecutive chairman, but he said he would be very involved in helping guide the carrier through its start-up. He's familiar with regulators in Washington, and he said he can help management develop a business plan and help directors to understand it.

He left American in 2003 after an uproar that followed the disclosure of lucrative executive pension and retention plans at a time when the carrier was seeking major labor concessions. He subsequently invested in

Hawaiian Airlines

, where he became, and will remain, a board member.

Carty invested an undisclosed amount in Virgin America, which has managed to raise $177 million, the most ever for a start-up airline, eclipsing the $135 million collected by JetBlue.

He said he's regularly offered airline investment opportunities that he turns down, but he found this one compelling. "In the last three years, I've seen more airline business plans than you can imagine," he said. "I've managed to throw most of them in the trash."