Virgin America Wins Tentative DOT Approval To Begin Flying U.S. Skies

Richard Branson's Virgin Group was cleared by the U.S. Department of Transportation to launch a budget airline that flies between states after restructuring the ownership and management of Virgin America to meet legal standards of foreign ownership of domestic carriers.

The Department of Transportation on March 20 announced tentative approval for the venture, saying Virgin America appears to meet citizenship tests. Among other moves, DOT said Virgin America agreed to replace CEO Fred Reid, who the government saw as too close to foreign investors. Virgin also proposed loosening other parent company control, such as the ability to veto certain contracts and spending.

Under the Federal Aviation Act, a company can only be certificated as a U.S. airline if it is actually controlled by U.S. citizens, the president and two-thirds of the board of directors are U.S. citizens, and that at least 75 percent of the voting interest is owned or controlled by U.S. citizens.

The Department of Transportation still is waiting for Virgin America to meet a few other demands, including providing advance notification before receiving any loans from foreign investors.

Virgin said it was still working to meet the unmet demands but that it anticipates winning full approval soon with the intention of beginning service by midsummer.

Opponents have three weeks to file objections. Such major U.S. carriers as American Airlines and Continental Airlines, which have fought approval in the past, have signaled that they won't continue to protest.