Virgin America Defends Ownership

Feb 24, 2009

A four-word phrase could sum up Virgin America’s official response to the Alaska Airline’s request for a new U.S. Transportation Dept. public investigation into the ownership and control of the airline (DAILY, Feb. 11).

The phrase: Mind your own business.

In calling for the investigation, Alaska Airlines questioned whether the airline is and will remain under U.S. ownership and control, as required by U.S. law for U.S.-based carriers. It cited the possible pullout of U.S.-based investors Black Canyon Air Partners and Cyrus New Joint Structure, which have the option in their investment deals to sell back their investment to the British-owned Virgin Group. Alaska also raised questions about Virgin America’s sources of new cash in 2008, which the airline has never publicly disclosed.

But in the Feb. 20 response filed with the DOT, Virgin America reiterated what executives of Virgin USA and Virgin Management told The DAILY in a face-to-face meeting Feb. 18: There is no threat that the airline will lose the U.S. ownership and control it is required to maintain under U.S. law, and that it has been privately keeping the DOT up-to-date on its financing. In part, that’s because the investors’ original deal with the airline essentially forbids them from cashing in their stakes until the Virgin Group finds U.S.-based replacement investors, they said (DAILY, Feb. 19).

In its Feb. 20 filing, Virgin America noted it already went through an 18-month-long public process to get its initial approval as a U.S.-owned and U.S.-controlled carrier.

“The department, not other airline competitors, is vested with the obligation to review citizenship, and it is the department, not other airline competitors, that needs notice of new funding or legitimate ownership issues,” Virgin America said, a sentiment it repeated numerous times in the filing. “It is also the department’s obligation to verify Virgin America’s ongoing fitness compliance, and it does not require public participation to do so, and has considerable experience and expertise in doing so.”

Virgin America said it filed a detailed one-year progress report with the DOT on Sept. 22, and that on Oct. 29 that DOT confirmed that Virgin America remained fit, willing and able to provide interstate air transportation.

“Virgin America will also continue to comply with all department notification requirements and to ensure its compliance with all ownership and control requirements,” it added. “Thankfully for consumers, none of these notifications are required to be blessed by any of Virgin America’s competitors.”

It also accused Alaska of trying to get involved now — after having voiced no opposition during that 18-month process — because of Virgin America’s “robust and effective competition” to Alaska on the Seattle-Los Angeles and Seattle-San Francisco routes.

Alaska did get support for its petition for a DOT investigation, however, from two unions: the Air Line Pilots Association and Aircraft Mechanics Fraternal Association. Many unions opposed Virgin America’s original application and have voiced concerns about foreign ownership as a threat to their U.S.-based jobs.

Photo: Guy Norris

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