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SAN FRANCISCO - 07/15/04 - Virgin America, the new low-fare airline being developed by Sir Richard Branson's Virgin Group, will be based in San Francisco.

The airport jumped into the bidding process for the hub late last year when California Governor Arnold Schwarzenegger reportedly telephoned Branson to lobby for a California hub for the new carrier's operations.

Scheduled for launch in the first quarter of next year, Virgin America will create up to 3,000 jobs over the next five years in both San Francisco and New York, although specific routes haven't been announced.

San Francisco International Airport won the bid over Boston, New York, and Washington, DC.

The new operation will be headed by Fred Reid, former president and chief operating officer of Delta Airlines, who has more than 25 years' experience in the industry.

The new service marks another victory for Airbus in its growing ascendancy over US-based Boeing in the civil aviation market with industry analysts calling the Virgin deal "a major blow" to Boeing's attempts to market its single-aisle 737 aircraft to low-cost carriers.

Financial details of the aircraft purchase were not available, but the parent Virgin Group has said it will order 33 Airbus A319s and A320s with an option to buy up to 72 more for the new service.

A319 aircraft typically carry 124 passengers, while the A320s carry about 150 passengers, according to Airbus.

Virgin's entry to the US market will up the ante in the escalating war between the low-cost airlines and their full-fare counterparts.

Virgin America's competition will come from budget carriers such as Southwest, JetBlue and AirTran which are steadily growing, while traditional carriers such as AMR Corp.'s American Airlines and Continental Airlines Inc. are struggling.

UAL Corp.'s United Airlines is reorganizing under bankruptcy protection, while Delta Air Lines Inc., the nation's third-largest airline, has said it might need to reorganize under the protection of a bankruptcy court if it is unable to reduce pilots' wages.

Despite a $15 billion bailout by the US government, the larger carriers have, since the terrorist attacks of September 2001 collectively laid-off more than 100,000 employees and mothballed 1,200 aircraft.

The American-controlled and majority-owned and managed Virgin America will effectively be a licensee of Virgin as US law forbids non-US entities from owning more than 49% of the equity or 24.9% of the voting power of an airline operating on domestic routes.

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