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Thursday, December 8, 2005 · Last updated 1:51 p.m. PT

Virgin America gets certification finances

THE ASSOCIATED PRESS

WASHINGTON -- The Virgin brand's new U.S.-based low-fare airline on Thursday submitted an application for federal certification after lining up $177.3 million in financing that was led by a group of American investors who will assume majority ownership of the carrier.

The bulk of the equity and debt behind Virgin America Inc. - $88.9 million - will come from VAI Partners LLC, a group backed by Black Canyon Capital LLC and Cyrus Capital Partners LP, the company said in a filing with the Department of Transportation. Virgin Group Ltd., the London-based parent company of Virgin Atlantic Airways, Virgin Express in Europe and Virgin Blue in Australia, will provide the remainder of the financing and become a minority shareholder.

U.S. law forbids foreigners from owning more than 49 percent of the equity or 24.9 percent of the voting power of a domestic carrier.

Virgin America said its newly formed board of directors named Mark Lanigan, a managing director at Los Angeles-based Black Canyon Capital as chairman of the airline, which is scheduled to launch transcontinental service in 2006. Frederick Reid, the former president of Delta Air Lines Inc., was named chief executive officer.

In June 2004, Virgin America announced that it had agreed to buy and lease up to 105 narrow-body jets from Airbus SAS and the carrier had originally scheduled to begin flying in mid-2005.

Virgin America previously announced that it intended to fly between San Francisco and New York. It did not elaborate on which cities it intended to serve in Thursday's filing with the DOT. It intends to employ 2,000 people by its second year of operation.

Virgin America's planned entry into the U.S. market comes as budget carriers such as Southwest Airlines Co., and JetBlue Airways Group Inc. are growing, while traditional carriers such as Delta and Northwest Airlines Corp. are struggling. Both Delta and Northwest are restructuring under bankruptcy court protection.

Virgin America said its corporate headquarters and operations will be based in San Francisco. Originally the corporate headquarters was going to be in New York.

Cyprus Capital is based in New York.