Branson says Virgin will not fall

Virgin Founder and Chairman Richard Branson speaks during a keynote address at the CTIA Wireless convention in Las Vegas, Nevada April 1, 2008.

CHICAGO (Reuters) - Some U.S. airlines are in danger of going bankrupt amid painfully high oil prices and a looming economic recession, but low-cost, high-service start-up Virgin America will survive, Richard Branson, head of Virgin Group VA.UL, said on Thursday.

The high percentage of empty seats on Virgin America's planes is no cause for alarm given the airline launched just eight months ago, the British entrepreneur told reporters in Chicago.

"They're doing well ahead of budget and we're very happy with the performance," Branson said.

He added that airlines often forecast it will take up to five years to fill planes on new routes. But Virgin America will not take that long to achieve load factors more in line with the industry, he said. Carriers routinely report load factors of 80 percent or higher.

Virgin America was founded by Branson and partly bankrolled by Virgin Group. The carrier, which launched in the United States in August, aims to serve transcontinental markets and large airports.

Despite its close association with Branson, Virgin Group owns only 25 percent of Virgin America because U.S. law blocks foreigners from owning a larger share of a U.S. airline.

The outlook was good for the carrier when it launched in August, but fuel prices have skyrocketed since then, forcing the failures of four niche airlines last week -- Aloha Airlines, Champion Air, ATA Airlines and Skybus Airlines.

Some experts wonder if larger low-cost airlines such as Virgin America could buckle under the pressure as well. Avondale Partners analyst Bob McAdoo said in a research note on Monday that the privately held carrier may be the next to fall.

Citing limited data from government filings, McAdoo noted Virgin lost $35 million in its first quarter of operations last year. The carrier flew planes that were often only a little more than half full on its primary domestic routes.

But Branson said he is "extremely pleased" with Virgin America's performance, forecasting it will overcome industry challenges that will sink competing carriers.

"If you sit here in three or four years time, it'll be flying to all the major American cities," he said.

The U.S. airline industry -- including Virgin America -- has been battered recently by soaring fuel costs that are pinching even the healthiest airlines. A series of fare increases by major carriers has partly offset the spike in fuel prices, but fares have not risen as fast as the price of fuel.

San Francisco-based Virgin America boasts leather seats on its airplanes, soothing cabin lighting and various entertainment options. Virgin America is betting travellers will pay for the comfortable travel as rival carriers strip away in-flight perks and charge for items that once were free.

(Editing by Andre Grenon)