Says Airline's Revised Application Can Meet US Citizenship Test

Virgin America's plan to significantly reconfigure its ownership and management structure puts it back on track to meet strict US citizenship tests under federal law, the US Department of Transportation tentatively ruled Tuesday. The tentative decision does not change current US airline investment law or its application.

As Aero-News reported, on December 27 the DOT found Virgin America's original application failed the citizenship tests outlined in law. The airline filed a largely revised plan one month later -- and that revised application, the Department has now tentatively found, should meet US ownership rules provided the company fully executes the proposed changes to its original plan.

The Department also imposed other conditions on Virgin America, which the carrier would have to meet before obtaining final approval. These conditions include completing required organizational changes, amending various agreements, and providing advance notice to the Department should the carrier get additional loans from the non-US-based investors.

In its revisions to the original filing, Virgin America offered to replace CEO Fred Reid, whose longstanding association with foreign investors -- and Sir Richard Branson -- had raised concerns about who would control the new carrier.

The company also proposed other reforms to bolster the US applicant's independence from UK investors, including removing the Virgin Group's veto power over certain contracts and expenditures, amending the company's loan agreements with the Virgin Group, restructuring its board of directors to reduce the number of foreign representatives, revising its trademark license to ensure that the US carrier can operate independently of UK-based Virgin Atlantic, and establishing a voting trust to administer the Virgin Groups' equity interest in the airline.

Under the Federal Aviation Act, to be certificated as a US airline a company must first show that it is actually controlled by US citizens, that the president and two-thirds of the board of directors are US citizens, and that at least 75 percent of the voting interest is owned or controlled by US citizens.

Interested parties may file an objection to the proposed decision with the DOT within 21 calendar days.

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