Virgin America Certificate Tentatively Approved

[Matt Molnar]

The DOT declared today that Virgin America's reapplication for an operating certificate is vastly improved over their original application, and outlined additional changes that, if met, would satisfy the DOT's citizenship requirements.

The added requirements:
• Amending a variety of material agreements, including existing aircraft leases, so as to address concerns about the role of the applicant’s largest foreign investor in the formation of the airline, by restricting the Virgin Group’s power over changes in such agreements and other related matters such as capital expenditures.
• Amending the company’s loan agreements with the Virgin Group and other formative documents to eliminate the latter’s ability (through veto rights and the requirement of prior written consent) to control the applicant’s business.
• Replacing its current Chief Executive Officer, who the record suggested might be considered “beholden” to foreign interests under DOT precedent, with a new official presumably having no prior affiliation with the non-U.S. investors of Virgin America.
• Restructuring its board of directors so as to reduce the number of Virgin Group designees.
• Requiring that the disinterested directors on the Virgin America board (that is, U.S. citizens) separately approve of the appointment or replacement of the trustee of Virgin Group’s shareholdings.
• Amending the voting trust agreement to require that the Trustee vote its shares proportionally to the other shareholders as to any matter that, in the opinion of the U.S. investor directors, creates a conflict of interest between the interests of Virgin Group and that of U.S. shareholders.
• Modifying the Virgin Trademark License Agreement to remove certain
geographic and operational restrictions on Virgin America and the requirement that it pay royalties to the Virgin Group should the applicant conduct operations independent of the Virgin name.
• Confirming that the current CEO has terminated employment with the applicant within 90 days of the certificate being issued and any follow-on consultancy within 180 days following termination of employment.
• Submitting copies of all executed and signed agreements prior to certification.
• Reporting to the Department in advance if any additional loans (or other debt funding) are to be provided to it from the Virgin Group.
• Establishing a voting trust to administer the Virgin Group’s 25 percent equity interest in the airline.

Full document: http://dmses.dot.gov/docimages/p89/461049.pdf
Reuters story: http://www.reuters.com/article/tnBasicI ... 8220070320

[PhilDernerJr]

Wow, this is getting VERY exciting. Eager to see how the next steps go.

[Iberia A340-600]

Wonder what will happen to those Virgin America Airbuses that are on there way to leases?

[JetBlueAirwaysFan]

Well, Virgin America is cleared to fly, pending a few things.

Virgin America Inc. won approval to begin flying, pending changes to its ownership plan.

The Burlingame, Calif.-based startup airline, owned in part by British billionaire Richard Branson, must replace CEO Fred Reid and make other changes to its corporate structure as a condition of final approval from the U.S. Department of Transportation.

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Virgin America first sought a license to fly in December 2005, when it raised more than $177 million in startup capital. But federal regulators expressed concerns over whether the airline met U.S. ownership standards, citing Branson's involvement.

The DOT on Tuesday outlined a number of changes it wants to see in Virgin America's corporate makeup. Assuming the airline makes those alterations, the airline can start offering service.

Among the changes the DOT requires is replacing Reid, an airline industry veteran hired by Branson, the entrepreneur who controls London-based venture capital organization Virgin Group Ltd. The agency said replacing Reid with "a U.S. citizen who has no prior affiliation with the Virgin Group," which would remedy regulators' concerns over the airline's independence from Branson.

Virgin America also must modify its trademark license agreement with Virgin Group to remove certain geographic and operational restrictions and the requirement that it pay royalties to the Virgin Group should the airline conduct operations independent of the Virgin name.

Virgin America said it plans to offer low-cost domestic air service like Dallas-based Southwest Airlines Co. (NYSE: LUV) and JetBlue Airways Corp. Its first route will be between San Francisco and New York City with other routes to follow.

Virgin America has planes and has hired 170 employees, including airport staff and crew members. The airline could begin offering flights as early as this summer.

Rival airlines like Fort Worth-based American Airlines (NYSE: AMR) and Houston-based Continental Airlines Inc. (NYSE: CAL), which lobbied against Virgin America. A spokesman for American said Wednesday that the airline was still studying the order and had no comment at this time.

Opponents have three weeks to object to the DOT decision. It is not likely that the DOT will reverse the decision it issued Tuesday.

Looks like CO and AA will not get their way.

[Nycfly75]

Im assuming they will be based at Terminal 4 at JFK in order to provide easy connections from Virgin Atlantic and the future North American-Virgin Nigeria code shared service.