Virgin America enters U.S. airspace -- What does that mean for U.S. airlines?

U.S. airlines beware: Like Branson's Virgin Atlantic, Virgin America is positioning itself to be a low-fare airline offering over-the-top comfort and customer service in comparison to what American's have experienced. Fares will be as low as $44 one-way for its short routes and $129 one-way across the country. The average Joe can even experience first class seating with fares as much as 50% lower than other carriers charge for the extra leg room, according to the company.

Even more, Virgin America will offer travelers top of the line in-flight entertainment dubbed "Red." Red is what CEO Fred Reid told USA Today, "[is] arguably two or more generations ahead of anything in the U.S. market today." He should know. Reid is a former Delta Air Lines (NYSE: DAL) President hired by Branson in 2004 to get Virgin America off the ground.

How is this going to impact U.S. Airlines? For the next year, Virgin's small workforce will have an insignificant impact on the bottom lines of most U.S. carriers. However, when Americans start to see they can watch live TV from DISH Network, pay-per-view movies, listen to music or play electronic games for the low costs Branson is offering, the impact could be monumental. Virgin America's presence could not only start another price war, but also pressure carriers to provide similar in-flight benefits to those found in the new airline to maintain market share. .

With rising fuel costs, domestic flight cuts, faltering union contracts and other problems within the industry, every major U.S. airliner – US Airways (NYSE: LCC), United Air Lines (NASDAQ: UAUA), Delta Air Lines, Southwest Airlines (NYSE: LUV), Jetblue Airways (NASDAQ: JBLU), American Airlines (NASDAQ: AMR), Continental Airlines (NYSE: CAL) – needs to figure out a game plan, and fast.