DOT reverses ruling, gives Virgin America tentative OK to fly
Andrew Compart, Travel Weekly, 3/20/2007
Virgin America might get to fly in the U.S. after all.
The Transportation Dept., which ruled in late December that the carrier did not meet the requirements for U.S. ownership and control, said March 20 that the airline offered to make enough substantive changes for the DOT to tentatively rule that it does.
The DOT, however, put conditions on the tentative approval it gave in its March 20 "show cause" order.
Those conditions include replacing Fred Reid as CEO -- a change Virgin America had offered to make if necessary -- within three months of receiving its DOT certificate. Reid could stay on as a consultant for six months after his dismissal "to facilitate an orderly transition to his replacement."
The DOT also conditioned approval on other changes, including additional liberalization of the airline's licensing agreement for the Virgin trademark. The changes would give the airline more freedom to fly anywhere it wants to when it doesn't use the Virgin name (although there's no indication right now that it wants to), and eliminate a requirement that it pay royalties to the Virgin Group on revenue that is not derived from use of the brand name.
The changes would come on top of the changes Virgin America already offered to make, which included removing the Virgin Group's veto power over certain contracts and expenditures, amending the company's loan agreements with the Virgin Group, restructuring its board of directors to reduce the number of foreign representatives and establishing a voting trust to administer the Virgin Groups' equity interest in the airline.
The DOT's decision is not final. Interested parties have 21 days to file objections, and then there's another seven days to file answers to those objections. The DOT will consider all of those filings before issuing its final order.
Also, Virgin America will need to agree to the DOT's extra conditions.
If Virgin America finally does take off, the San Francisco-based airline's first route will be San Francisco-New York (Kennedy). The airline also plans to add service to Washington (Dulles), Los Angeles, San Diego and Las Vegas within its first nine months of operation.