May 19, 2007

Virgin America receives permission for U.S. flights

WASHINGTON (AP) — Startup airline Virgin America won final approval Friday to take to the skies in the United States.

Federal regulators approved the company's revised plan to operate U.S.-based commercial flights after the company made numerous concessions, including replacing its chief executive, to allay concerns about the foreign ownership stake of Richard Branson's London-based Virgin Group Ltd.

Service is expected to start this summer with flights from its home base at San Francisco International Airport to John F. Kennedy International Airport in New York. The company has said it will serve up to 10 cities within a year of beginning operation and up to 30 cities within five years. Salt Lake City is among additional cities Virgin America is considering.

In a statement, the Transportation Department said Virgin's revised plan, filed in January by Burlingame, Calif.-based Virgin America, is now in compliance with laws that limit foreign control of domestic air carriers.

That includes company ownership rules that cap foreign control of a U.S. airline at 25 percent of voting shares. Virgin also agreed to replace CEO Fred Reid, the former Delta Air Lines Inc. president hired by British billionaire Branson, founder of London-based Virgin Atlantic Airways.

The DOT said it concluded that replacing Reid with a CEO not affiliated with Branson's Virgin Group would alleviate worries about the airline's independence. Reid will be allowed to stay with the company for six months after its start.

"This has been quite a journey, but I'm truly happy that we will be able to launch our airline," Reid said in a prepared statement.

Other DOT conditions include requiring U.S. directors on Virgin America's board to approve a trustee to represent Virgin Group's 25 percent stake and reporting to federal regulators any loans Virgin Group plans to make to the U.S. carrier.


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