Virgin America expects U.S. to deny right to fly
Friday December 22, 6:04 pm ET

NEW YORK (Reuters) - Virgin America Inc., a low-cost airline with a name made famous by British entrepreneur Richard Branson, expects the U.S. government to reject its application to start flying, a spokeswoman said.

The company announced earlier on Friday that it had completed the last formal step in the U.S. Federal Aviation Administration's airline certification review and only needed approval from the Department of Transportation.

The spokeswoman declined to elaborate, but Virgin America has faced opposition from U.S. carriers such as Continental Airlines (NYSE:CAL - News) who argue that Branson's Virgin Group (VA.UL) effectively controls the airline in violation of U.S. law.

The law prohibits a foreign equity stake of more than 25 percent in a U.S. airline.

British-based Virgin Group, which has stakes in airlines in Europe, Australia and Nigeria, holds a 25 percent stake in the company, lends the airline its brand and has promised to provide financing.

Virgin America says it is controlled by U.S. citizens and conforms with U.S. law and that rival airlines are using the foreign control argument to limit competition.

The airline said earlier that it planned to enter the market armed with $177.3 million in start-up capital.

Much of that financing came from VAI Partners LLC, an investment group funded by private equity firms Black Canyon Capital and Cyrus Capital Partners.

The company had 33 Airbus planes on order and was planning to start operation with just two to four aircraft once it was allowed to fly.

The airline intended to first fly between San Francisco and New York, hoping to grow to 20 routes in two years.