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Virgin breaks into domestic market

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Tess Vigeland: Ready for a new low-cost airline? Today, Virgin America Airlines started selling tickets. Flights don’t start until next month. But when they do, the new carrier will offer rides from San Francisco to New York, Los Angeles, Vegas and Washington.

Virgin is entering a crowded and competitive market, where even a low-cost stalwart like Southwest is raising fares. But if it focuses on customer service, some analysts say Virgin America might take off. Marketplace’s Jeff Tyler has the details.

Jeff Tyler: Virgin America may be able to take advantage of consumer discontent. According to Forrester Research, only about a third of business travelers are loyal to any particular airline.

Henry Harteveldt: When the IRS comes in as doing a better job with customer satisfaction than the airline industry, you know something is very wrong.

That’s Forrester’s airline analyst Henry Harteveldt. He says consumers may be attracted to Virgin America’s amenities — economy class seats come with live TV and a standard electrical outlet, so you can plug in your computer.

What you won’t get is any sort of tie-in with Virgin Atlantic. Aviation analyst Richard Aboulafia with the Teal Group says Virgin America had to limit foreign ownership in order to get the business to fly with regulators.

Richard Aboulafia: For years, there’ve been insurmountable barriers to foreign carriers entering the U.S. domestic airline market. But what you’ve got is a foreign airline basically setting up a brand subsidiary, if you will. One that they only have part ownership in, yet one that bears their brand and logo.

The Virgin America brand isn’t making the best first impression. Tickets between Los Angeles and San Francisco may only cost 44 bucks one-way. But Forrester analyst Henry Harteveldt says consumers are having trouble buying them over the Internet.

Harteveldt: It announces it’s going to start selling tickets. It offers very attractive fares. And then the website crashes under the weight of the traffic. That’s just inexcusable.

But Harteveldt is still giving Virgin America a try. He managed to buy a ticket to New York for Labor Day.

In Los Angeles, I’m Jeff Tyler for Marketplace.

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