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US gives tentative approval for Virgin America operations

A new airline called Virgin America won tentative approval from US authorities yesterday to get off the ground, as a government agency said the carrier appeared to meet the test for US ownership.

The announcement by the US Department of Transportation marked a reversal from a decision in December, when the agency said the airline was not under the control of US citizens and too closely linked to British billionaire Richard Branson's Virgin Group.

In a statement, the department said Virgin America's plan to reconfigure its ownership and management structure "puts it back on track to meet strict US citizenship tests under federal law."

The upstart low-cost airline, which has licensed the "Virgin" brand from Britain's Virgin Group, has said that it is independent from the companies headed by Branson, who founded Virgin Atlantic airlines and a host of other Virgin-branded firms.

The department gave tentative approval to Virgin America's plans to begin US operations but said the carrier would have to complete its organizational changes, amend various agreements, and notify the agency if it gets additional loans from non-US investors.

The department said it would solicit public comments for 21 days before a final decision.

The agency said Virgin America had offered to replace its current chief executive officer, "whose longstanding association with foreign investors had raised concerns about who would control the new carrier."

The CEO named by the group last year was former airline executive Fred Reid, a US citizen who had been president of Lufthansa.

Other proposed reforms called for removing the Virgin Group's veto power over certain contracts and expenditures, amending loan agreements with the Virgin Group, and restructuring its board of directors.

Virgin America said is also in the final stages of receiving approval from the Federal Aviation Administration.

Virgin America, based at San Francisco International Airport, said it plans a "mid-summer launch" from its base to New York's John F. Kennedy Airport.

It plans flights to Los Angeles, San Diego, Las Vegas and Washington within nine months of the company's first flight.

It has placed orders for 34 Airbus A319 and A320 passenger jets.
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