MR. BRANSON GOES TO WASHINGTON -- IN QUEST OF A U.S. CARRIER

British billionaire Richard Branson has a new crusade. He's urging Congress to change what he calls the "ridiculously restrictive and antiquated" laws that prevent foreigners from owning more than 25% of a U.S. airline. In return, he's promising a $250 million investment in starting up a new, low-cost U.S. domestic carrier -- named "Virgin America."

Skeptics say Branson is as full of hot air as the balloon he hopes to circle the globe in this December. But there was a serious attempt to get Virgin America aloft earlier this year. David G. Neeleman, former president of Morris Air, told Business Week Online that he was prepared to invest a couple hundred million dollars in the new carrier, with Branson contributing the Virgin brand name and a small amount of cash in return for a 25% equity stake. After six months of talks, the deal broke down, according to Neeleman, because Branson decided he wanted majority control of the new venture. "It was clear what the deal was in the beginning," says Neeleman, expressing some bafflement about Branson's change of heart.

Now, Branson is lobbying Congress in an effort to get the 25% foreign-ownership limit lifted. At an airline industry gathering in Washington, D.C., in late September, Branson told frequent jokes and closed his speech by urging Congress to, "Screw it. Let's do it." His meaning: Get rid of the 25% ownership law.

Branson says he has found a key supporter, too, in Senator John McCain (R-Ariz.), chairman of the Senate Commerce, Science & Transportation Committee. McCain says he is indeed "very interested" in loosening foreign-ownership restrictions and will urge the policy change in a letter to Transportation Secretary Rodney Slater. Senator Robert Torricelli (D-N.J.) and Charles A. Hunnicutt, Assistant Secretary for Aviation & International Affairs at Transportation, have expressed interest in reviewing current law. The Transportation Dept. is considering letting foreign carriers own up to 49% of domestic carriers but isn't willing to grant majority ownership. So Branson is fighting an uphill battle if he wants a controlling stake.

Branson, who started Virgin Atlantic 15 years ago, says his motives are simple. "The market opportunity in America is gigantic," he says. Aside from promising to create new jobs for American workers and hints that he'll buy Boeing jets, Branson says Virgin America's model would be an upscale SouthWest Airlines, complete with frills such as Sega games for kids and a business or first-class section. "The company will be an American company, the staff will be an American staff, the planes most likely will be American, the people that are going to benefit are going to be American consumers. The only difference is that money from abroad is going to be invested in your country," Branson intones.

Rivals scoff at his chances. When asked recently whether he thought Branson really wants to start an airline in the U.S., American Airlines CEO Donald J. Carty snapped back, "I can't believe he's that dumb."

But Branson has plenty of possible motives. He badly wants to derail the proposed American Airlines/British Airways alliance -- which could put more competitive pressure on Virgin Atlantic. He may also have an eye on disrupting the "open skies" bilateral talks between the U.S. and Britain. "Branson obviously doesn't want the U.S. and Britain to reach an agreement which would also permit American and BA to form this alliance," says Daniel M. Kasper, a principal at the Law & Economics Consulting Group in Cambridge, Mass. While Kasper figures the U.S. market would be tough for Virgin's chief to crack, he also cautions that "it would be a mistake to underestimate Branson."

Indeed, a few years back, Virgin's megastore on the Champs Elysees in Paris waged a bitter battle with the French government to change laws that prevented stores from opening on Sundays. The huge store ignored the law and was threatened with a fine of 4 million francs for every Sunday it continued to stay open, according to an account in Tim Jackson's book "Virgin King." Branson flew to France, warning legislators that jobs would be lost and his company's investment curtailed if the law wasn't changed. Eventually, Branson won his battle -- and in honor of the company that prompted the change, the new legislation was dubbed "loi Virgin."

(This BW Online Exclusive was prepared by Julie Flynn in London, Lorraine Woellert in Washington, Wendy Zellner in Dallas, and David Leonhardt in Chicago.)

EDITED BY DOUGLAS HARBRECHT