Virgin America 'frustrated' by US delays

Financial Times
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Virgin America has vented its frustration at delays to its planned launch of domestic US flights by calling on US aviation regulators to set a timetable to review its application.

The start-up carrier still hopes to begin flights this year, but requires approval from the US Department of Transportation and the Federal Aviation Administration.

Virgin America said the DoT had been sitting on the application since December 13, beyond the time frame laid out in its normal procedures.

Fred Reid, Virgin America's chief executive, told the FT that he was "somewhat frustrated" by the delay, which comes amid opposition to Virgin's plans from airlines including American, Continental and Delta and a wider controversy over the role of foreign investors in the US industry.

"This is an open and shut case," said Mr Reid. "They are delaying our application for no good reason.

"The DoT has been positive towards new entrants, historically. I see no reason to change that now."

Virgin America plans to launch a transcontinental US service from its San Francisco base, building up a fleet of 12 aircraft within a year. It has 35 firm orders for aircraft and options on a further 75.

The airline is the latest attempt by Sir Richard Branson, the UK-based entrepreneur, to leverage his Virgin brand in the global airline sector.

Virgin America has secured $177.3m in funding, including $88.9m from two US private equity groups.

Virgin companies will invest $29.8m in equity and provide $58.6m in debt financing to conform with US law limiting foreign investors in a US airline to 25 per cent of the voting rights and barring any "semblance" of control by overseas interests.

Opponents have questioned whether Virgin America meets those criteria and called for more information. However, the DoT has yet to set a closing date for responses to be filed, effectively freezing the application.

DoT officials were unavailable for comment over the weekend, but theVirgin America application comes at a time when the department's efforts to ease restrictions on foreign involvement in the US industry have run into severe problems.

A DoT proposal to formalise its subjective interpretation of overseas investor influence received a chilly reception last week at a meeting of the House aviation subcommittee.

The issue threatens to derail efforts to introduce a new aviation agreement with the European Union in October, as approval from Brussels hinges on a "favourable" outcome to the investment review.

Copyright 2006 Financial Times