Ex-American Airlines CEO joins Virgin's new U.S. venture
EXCLUSIVE: Don Carty talks about Virgin America, where he becomes chairman.
by Andy Serwer, FORTUNE editor at large

NEW YORK (FORTUNE) - Former American Airlines CEO Don Carty has agreed to serve as chairman of Virgin America, the start-up airline backed in part by Virgin CEO Richard Branson.

FORTUNE spoke exclusively with Carty outside the offices of the Department of Transportation in Washington on Monday.

Carty, 59, is joining the company to balance out the board. He will be the "airline brain" for the majority owners of Virgin America, an investment company called VAI partners, which is owned by Black Canyon Capital and Cyrus Capital. A source points out that VAI is a financial buyer with no operating expertise. VAI will count on Carty to provide that.

"I'm really excited about the business plan that Virgin America has," said Carty. "We have an awful lot of capital, a very good management team. And the Virgin brand is just the icing on the cake."

Virgin America is seeking federal approval to fly in the U.S. Carty, who's well-connected in Washington D.C., will be a welcome asset.

U.S. airline executives are lobbying against Branson's entry into domestic airspace. What does Carty think about those efforts by Continental and others? "They've competed against Richard Branson before, so they are going to be concerned, but they don't want to be wrong, and it's obvious that U.S. investors control VA," he says.

When will VA fly? Carty chuckles. "Obviously we don't want to be presumptuous when it comes to the DOT," he says politically. "We hope soon."

Carty left American Airlines in 2003 amid union furor over his and other executives' large pay packages, even as union rank and file were being asked to slash their wages. But he bears no grudge. "I have the utmost respect for everyone at [American Airlines]," Carty told FORTUNE. "It is the only legacy carrier not to disappear or go bankrupt."

While most airlines have been struggling, Carty is eager to get back into the industry. "In some ways it's a troubled business, in some ways it isn't," Carty says. "Clearly there is absence of low-costs seat in the market place." Will legacy carriers liquidate? "I don't think so much as contract significantly," he says. "You've already seen that with Delta and Northwest."

FORTUNE asked Carty if being on the board of Hawaiian Airlines was a conflict of interest. "No, because VA isn't going to be potentially competing with them for a very long time," he says.

Has Carty spoken with Branson? "The last time I spoke with Richard Branson was about six years ago," Carty recalls. "It was an adversarial encounter in the Houses of Parliament. I was there in favor of a partnership between AMR and British Airways and he [as head of Virgin Atlantic] was against it. I haven't spoken to him since, or about my role at VA."

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