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Sun, Feb 25, 2007

Virgin America Begins Leasing Out Its Planes

Airline Seeks Capital While Awaiting DOT Nod

Faced with maintaining a fleet of aircraft it can't fly, fledgling carrier Virgin America has started to lease some of its 11 Airbus A320s to other carriers in order to generate needed revenue.

On Friday, airline CEO Fred Reid told Reuters the airline has finalized two leases with an unnamed US start-airline, and is negotiating terms with a foreign carrier for two more.

Reid stressed the leases are short-term, and that Virgin America could take the planes back if, or when, his airline is cleared to begin US operations. Analysts say Virgin could make millions of dollars each month from leasing the brand-new aircraft.

As Aero-News reported, Virgin America's initial request to the Department of Transportation to begin US service was denied, due to foreign ownership concerns. Regulators were concerned with the airline's ties to Sir Richard Branson's Virgin Group, which provided financing and the right to brand the aircraft with the Virgin name.

The airline later amended its management structure to place greater emphasis on US ownership, and resubmitted its application to the DOT. That application is now under review.

Reid maintains Virgin America will be solely under the control of US investors and management. The former president and COO of Delta Air Lines also volunteered to step down, if it would clear the way for Virgin to begin service.

"The patience and the tenacity of our investors is legendary. They are not willing to give up. It is too good of an idea. We've come too far to stop," Reid said.

Other US airlines have protested Virgin's application, saying it sets a dangerous precedent of allowing foreign entities to exert control over American airlines.

FMI: www.virginamerica.com

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