- The Washington Times - Tuesday, March 20, 2007


The Transportation Department yesterday removed a barrier to Virgin America’s plans to start a U.S. airline by voicing support for its plan to comply with laws limiting foreign control of a domestic carrier.

The agency gave tentative approval to a revised plan filed in January by Virgin America, saying that the plan “should meet U.S. ownership rules” that cap foreign control of a U.S. airline at 25 percent. The Burlingame, Calif., start-up still faces opposition from several U.S. airlines.

One condition for the Transportation Department’s support is that Virgin America replace Chief Executive Officer Fred Reid, the former Delta Air Lines Inc. president hired by British billionaire Richard Branson.

The agency said replacing Mr. Reid with a CEO “who has no prior affiliation” with Mr. Branson’s Virgin Group Ltd. would “substantially” alleviate concerns about the airline’s independence. Virgin Group has a minority stake in the company.

After removing Mr. Reid as CEO, which the agency acknowledged would pose challenges for the new airline, Virgin America would be allowed to retain him as a consultant for six months.

Mr. Reid declined to make clear whether he would step down, but said: “Launching the airline is too important to worry about the parochial views of one person, including the CEO.”

Other conditions stipulated by the Transportation Department include: Requiring U.S. directors on Virgin America’s board to approve a trustee to represent Virgin Group’s 25 percent stake in the airline; and reporting to federal regulators any loans Virgin Group plans to make to the U.S. airline.

In December, the Transportation Department tentatively denied Virgin America’s application to fly, mainly because of its ties to Mr. Branson, who came up with the idea.

Virgin America in January proposed concessions to allay the agency’s concerns. The reforms included selling more stock to U.S. investors, eliminating one of the three board seats awarded to Mr. Branson’s Virgin Group and, if necessary, firing Mr. Reid.

The airline in late January added Samuel Skinner, secretary of transportation under the first President Bush in the late 1980s and early 1990s, as vice chairman.

Several of the major U.S. airlines, including AMR Corp.’s American Airlines, Delta Air Lines Inc. and Continental Airlines Inc., have led the drive to prevent Virgin America from flying. Opponents have 21 days to object to the agency’s tentative conclusions.

Virgin America hopes to start service this summer with flights from San Francisco International Airport to John F. Kennedy International Airport in New York.

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