Tue, Jan 12, 2010
Airline Remains A 'U.S. Citizen', DOT Finds
The DOT announced last week that
after conducting a thorough review it has found that Virgin America
remains a U.S. citizen and remains under the actual control of U.S.
citizens. Under U.S. law, only airlines that meet the
standards for U.S. citizenship may hold authority to operate as a
U.S. airline.
DOT originally certified the airline's citizenship status in
August 2007. The air carrier later notified the Department of
a significant potential shift in its shareholder makeup. As a
result, DOT launched a review into whether the air carrier would
continue to meet U.S. citizen requirements.
To meet the necessary standards, at least 75 percent of an air
carrier's voting stock must be owned or controlled by U.S.
citizens, the president and at least two-thirds of the board of
directors and managing officers must be U.S. citizens, and the air
carrier must be under the actual control of U.S. citizens. DOT
examines a variety of factors to determine "actual control" based
on the totality of circumstances in each case.
Following discussions between DOT
and the air carrier, Virgin America agreed to make a number of
changes to ensure that the air carrier would remain under the
ownership and actual control of U.S. citizens. These changes
include, among other things, provisions to ensure that new
investments of capital from entities other than the Virgin Group -
a collection of the United Kingdom companies and/or citizens that
own 25 percent of the air carrier's stock - can and will be
obtained. Virgin America also will add an additional U.S. citizen
to its board, resulting in seven U.S. citizen investor designees as
voting members on the nine-member board.
As part of the proposed transaction, Virgin America will obtain
an additional $68.4 million in unsecured debt from its
shareholders. This facility will further improve the liquidity of
the company, positioning it for additional growth in 2010 and
beyond.
"Today is a great day for airline competition, for our traveling
guests and for our teammates," said Virgin America President and
CEO David Cush in a news release following the announcement. "We're
extremely pleased with the Department of Transportation's
announcement. With this behind us, we intend to focus on what we do
best: injecting new competition into markets as we grow, creating
new jobs and delivering an unrivalled guest experience."
DOT also dismissed petitions by Alaska Airlines and the Aircraft
Mechanics Fraternal Association for a public inquiry into Virgin
America's citizenship.
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