Virgin Group is planning to launch a discount airline in the US to rival the current players JetBlue and Southwest.

Virgin chairman Sir Richard Branson said the airline would be launched by June 2004.

"We are planning to get in there and make sure there is a third, very powerful low-cost airline in America," said Sir Richard.

He also suggested there would be an upturn in business travel in the US and UK, after what has been the worst downturn in years.

"The premium traffic is coming back. Sars is behind us, the recession is beginning to be behind us and there is a lot more activity out there," he said.

Starting from scratch

Sir Richard made his upbeat projections at the unveiling of a new premium class service for Virgin Atlantic, his transatlantic airline.

He predicted the new offering would gain passengers from rival British Airways' withdrawal of its luxury Concorde fleet later this summer.

At the other end of the market, Sir Richard said the US budget carrier would be set up along the lines of Virgin Group's Australian carrier, Virgin Blue.

Virgin plans to start the US fleet from scratch with between 10-15 planes, rising to 30 within 18 months.

"Our philosophy is that (this is) the best way to build a company ."

US rules

Under US law, foreign companies are only allowed to own 25% of the voting rights in a US airline and an economic interest of up to 49%.

The rules would mean a deviation from Virgin's usual stance of owning the controlling stake in its businesses.

US transport secretary Norman Mineta last month urged Congress to raise the foreign ownership in airlines to 49%.

Sir Richard said he hoped the laws could be relaxed and that clauses would permit Virgin to take control should the laws be relaxed.