SAN FRANCISCO (Map, News) - Airline will lease planes to others until approval

S.F. Airport — Still-grounded startup airline Virgin America popped the bubbly for its new plane “Jefferson Airplane” on Wednesday in a marketing event of grand proportions as business politicians and business people eagerly awaited the jobs and contracts the new aviation firm could bring.

A San Francisco International Airport hangar was packed with Virgin’s approximately 90 employees, as well as politicians and businesspeople already contracting with or hoping to do business for the new airline.

Virgin America is still awaiting Department of Transportation approval to fly after nearly a year of waiting in which rival airlines such as Continental Airlines Inc. (CAL) have filed protests that the airline is not truly U.S.-owned as required by law, but rather owned by Sir Richard Branson’s Virgin companies.

Virgin executives dispute the charge, saying Branson is a minority holder whose companies are leasing the name to the new airline. They hope to receive permission to operate a passenger airline and begin flying in early 2007. Once it does fly, the company will expand to around 1,000 employees in a year, many of them local, CEO Fred Reid said.

Virgin America has received eight A320s and A319s out of 34 ordered from Airbus, in addition to the A320 dubbed “Jefferson Airplane” by Reid after the 1960s rock band of which Grace Slick was the lead singer.

“It’s great to have the name Jefferson Airplane on an airplane,” Slick said. “The Grateful Dead would have been a bad name for an airplane.”

The Burlingame-based airline is launching a promotional contest to have potential customers name the planes, with a prize yet to be determined.

Meanwhile, Virgin America plans to lease these planes to other airlines while awaiting approval and while starting up, since it is not cost-efficient to keep planes grounded, Reid said.

He added that the planes and the airline will have a variety of technologies that will make the experience of flying easier and more fun, from checking in to watching pay-per-view movies on screens larger than those offered by JetBlue Airways Corp. (JBLU).

The airline plans to be competitive — and competitively priced — by having its operations be 25 percent to 40 percent cheaper per “flown seat mile” than “relevant competitors,” Reid said. The going rate per flown seat mile ranges from 7 cents to 15 cents, he said.

The company plans to accomplish that by contracting out non-flight and non-executive business services such as payroll and using off-the-shelf information technology, Reid said, a bit of wealth-sharing that gives significance to the presence of Bay Area businesses at the party.

Local companies present ranged from the entertainment — DJ Mark Farina of The City’s Om Records — to Bradley Berlin of Stealth Network Communications in Pleasanton, the airline’s LAN and IT security provider.