Takeoff uncertain for airline
Startup Virgin America braces for setback in bid to win approval to fly SFO-New York
David Armstrong, Chronicle Staff Writer
Saturday, December 23, 2006
Virgin America, the startup airline that plans to operate from San Francisco International Airport, says it expects that its application to begin service will be rejected by the Department of Transportation next week, a blow which would, at a minimum, postpone its launch.
The airline believes it can submit a revised application and eventually win government approval, a company spokesman said.
Virgin America Inc., a Burlingame company 25 percent owned by British entrepreneur Richard Branson, filed for Transportation Department approval in December 2005. It has since ordered aircraft and won Federal Aviation Administration clearance in a technical review. But the airline cannot begin service until the Transportation Department signs off in a separate procedure.
Virgin America, which identifies itself as a low-cost carrier, has proposed to operate transcontinental flights between SFO and New York.
Its bid has been snagged by objections made by Continental Airlines and other major U.S. carriers that Branson, a British citizen, will exercise actual control of the new carrier. That's contrary to U.S. law, which requires control of airlines to rest with U.S. citizens.
Virgin America's Chief Executive Officer Fred Reid has insisted that Branson is simply an investor and that the U.S. company is licensing the Virgin brand.
Reid told the Wall Street Journal online edition and Bloomberg News Friday that Virgin America had heard informally from contacts in the government that its application would be rejected and the news will be delivered next week.
Virgin America's chief told Bloomberg that he expected the application eventually to be approved, but it's "theoretically possible" the government's objections could be so sweeping that the airline would not be able to get off the ground.
Transportation Department spokesman Bill Mosley declined to comment on the status of the application and said the agency had "not set any timetable'' for ruling on it. He said that the department had requested more documentation after Virgin America filed its application in December 2005 and that the airline had complied.
Virgin America spokesman Gareth Edmonson-Jones said Friday that the company would not identify who told it to expect a confirmation delay but that it is bracing for a setback. He stressed that any government concerns would be addressed on appeal.
Reid told Bloomberg Friday that Virgin America could still take to the air sometime in 2007.
Virgin America's application has received an unusually high degree of scrutiny -- chiefly because of Branson's involvement, said Henry Harteveldt, an airline analyst who heads the San Francisco office of Forrester Research.
"I believe there's a double standard being applied toward Virgin America,'' Harteveldt said. "This stems from the fact that Richard Branson is involved. It's not so much Mr. Branson himself. Toyota can open factories in this country and U.S. banks buy branches overseas. But there's this belief that airlines are essential to national security.''
Branson, as a foreign citizen, has bolstered this belief, Harteveldt said -- and inadvertently done so at a sensitive time in international aviation circles.
The United States, he said, has been trying to forge an ''open-skies'' agreement with the European Union that would allow U.S. and EU airlines unprecedented access to each other's markets.
U.S. carriers especially covet greater access to London's Heathrow airport, which handles more international traffic than any airport in the world. European carriers are eager to fly more freely in the United States, the world's biggest aviation market.
However, an open-skies pact has met with nationalistic and security concerns. Virgin America's application appears to have been swept up in this debate, he said.
"There's also an application from a company called SkyBus, in Ohio, and it is not receiving this level of attention,'' said Harteveldt. SkyBus is U.S.-owned.
E-mail David Armstrong at [email protected].
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