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Takeoff Uncertain for Virgin America
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Changes As Virgin America Seeks Approval
Changes as Virgin America seeks approval
Airline tries to overcome perceptions about ownership
Ryan Kim, Chronicle Staff Writer
Thursday, January 18, 2007
Virgin America, the fledgling Burlingame airline that has been stymied in its attempts to get its wings, announced a sweeping set of corporate governance changes Wednesday in another push to win federal approval to fly.
In a response to a tentative rejection last month from the Department of Transportation, the carrier said it would surrender certain veto rights for its British minority owner, the Virgin Group, place the Virgin Group's minority ownership shares in a U.S. trust and even offer to dismiss Virgin America's new chief executive, Fred Reid.
"We have really jumped through rings of fire, bent over backward and shown ourselves to be in good faith," said Reid in a phone interview. "There is no good reason to deny this application, which is squarely in the public interest."
The company has run into trouble over perceptions about its ownership. U.S. law requires that domestic airlines be at least 75 percent owned by American citizens. The company maintains that has been the case with Virgin America, which is 25 percent owned by the Virgin Group.
But Department of Transportation officials maintained the company's intricate structure, which involves some Cayman Islands corporations, gave foreign interests more than the allowable amount of ownership. The government also said that a licensing agreement with Virgin Group founder Richard Branson ties the carrier to Virgin Group and that Reid was beholden to Branson, who hired him.
Reid said the concessions show the company is firmly controlled by Americans. He said the minority ownership shares would be controlled by a trustee approved the Department of Transportation.
He said the company has also liberalized its trademark license in such a way it could drop the Virgin name if necessary. And the company also said it removed one of Virgin Group's seats on the board of directors, leaving Virgin Group with two of the eight remaining seats.
Virgin America has touted itself as an innovative low-fare airline that will bring about changes to the industry, including an environmentally friendly business plan. The company has raised $177 million from investors, rented offers near San Francisco International Airport, hired a staff of 169 people and ordered 33 planes.
A Department of Transportation spokesman declined to comment on Virgin America's response. The public will have 14 days to comment on the carrier's plans. Regulators then could take a few months to issue a decision. Reid said the carrier could begin flights within a couple months of approval.
Henry Harteveldt, a senior analyst with Forrester Research, said the changes made by Virgin America are significant enough to win approval from the Department of Transportation.
"The fact that they are taking steps to create a voting trust, relinquishing a board seat and the fact that they would be willing to drop the Virgin reference in the brand name shows this is a company that is serious about taking to the skies," Harteveldt said.
He said the holdup has occurred because of opposition from traditional domestic carriers that are not keen on more competition, especially from a carrier that is connected to an innovator like Branson. Branson founded Virgin Atlantic Airways of London and sells a slew of Virgin-branded products, everything from vodka and comics to cell phones and colas.
"If you had the same investment in an airline called Air Potato, you would have none of the opposition," said Harteveldt. "The carriers are seeing what JetBlue did six years ago and they're worried they're going to lose more market share to another creative upstart."
David Miree, a spokesman for San Francisco Mayor Gavin Newsom, said he hopes Virgin America has now satisfied the federal government's concerns and can soon begin flights out of San Francisco International Airport.
E-mail Ryan Kim at [email protected].
Page C - 3
Changes as Virgin America seeks approval
Airline tries to overcome perceptions about ownership
Ryan Kim, Chronicle Staff Writer
Thursday, January 18, 2007
Virgin America, the fledgling Burlingame airline that has been stymied in its attempts to get its wings, announced a sweeping set of corporate governance changes Wednesday in another push to win federal approval to fly.
In a response to a tentative rejection last month from the Department of Transportation, the carrier said it would surrender certain veto rights for its British minority owner, the Virgin Group, place the Virgin Group's minority ownership shares in a U.S. trust and even offer to dismiss Virgin America's new chief executive, Fred Reid.
"We have really jumped through rings of fire, bent over backward and shown ourselves to be in good faith," said Reid in a phone interview. "There is no good reason to deny this application, which is squarely in the public interest."
The company has run into trouble over perceptions about its ownership. U.S. law requires that domestic airlines be at least 75 percent owned by American citizens. The company maintains that has been the case with Virgin America, which is 25 percent owned by the Virgin Group.
But Department of Transportation officials maintained the company's intricate structure, which involves some Cayman Islands corporations, gave foreign interests more than the allowable amount of ownership. The government also said that a licensing agreement with Virgin Group founder Richard Branson ties the carrier to Virgin Group and that Reid was beholden to Branson, who hired him.
Reid said the concessions show the company is firmly controlled by Americans. He said the minority ownership shares would be controlled by a trustee approved the Department of Transportation.
He said the company has also liberalized its trademark license in such a way it could drop the Virgin name if necessary. And the company also said it removed one of Virgin Group's seats on the board of directors, leaving Virgin Group with two of the eight remaining seats.
Virgin America has touted itself as an innovative low-fare airline that will bring about changes to the industry, including an environmentally friendly business plan. The company has raised $177 million from investors, rented offers near San Francisco International Airport, hired a staff of 169 people and ordered 33 planes.
A Department of Transportation spokesman declined to comment on Virgin America's response. The public will have 14 days to comment on the carrier's plans. Regulators then could take a few months to issue a decision. Reid said the carrier could begin flights within a couple months of approval.
Henry Harteveldt, a senior analyst with Forrester Research, said the changes made by Virgin America are significant enough to win approval from the Department of Transportation.
"The fact that they are taking steps to create a voting trust, relinquishing a board seat and the fact that they would be willing to drop the Virgin reference in the brand name shows this is a company that is serious about taking to the skies," Harteveldt said.
He said the holdup has occurred because of opposition from traditional domestic carriers that are not keen on more competition, especially from a carrier that is connected to an innovator like Branson. Branson founded Virgin Atlantic Airways of London and sells a slew of Virgin-branded products, everything from vodka and comics to cell phones and colas.
"If you had the same investment in an airline called Air Potato, you would have none of the opposition," said Harteveldt. "The carriers are seeing what JetBlue did six years ago and they're worried they're going to lose more market share to another creative upstart."
David Miree, a spokesman for San Francisco Mayor Gavin Newsom, said he hopes Virgin America has now satisfied the federal government's concerns and can soon begin flights out of San Francisco International Airport.
E-mail Ryan Kim at [email protected].
Page C - 3
pilotyip
Well-known member
- Joined
- Nov 26, 2001
- Posts
- 13,629
$95 to start for first year CA pay, that is not bad to get into something on the ground floor. If it follows the path of its Virgin counterparts around the world, it will be successful. In a couple years you are in the upper 10% of all US wage earners. Speaking of lines at job fairs, I remember the LA Air Inc job fair in March of 2000. Commute Air had a longer line than Jet Blue. I wonder how many of the pilots who stood in line for hours to visit DAL, AAL, and NWA wished now they had gone to hte JB line?
It's just a matter of time...the money drain not withstanding! Got plenty of money there FLYIGUY????!!!!
177 million!
spinproof
Well-known member
- Joined
- Oct 19, 2002
- Posts
- 774
Yeah Buddy!!! Thats what I'm talking 'bout!!!
Saw this in the news section of Goolge today..just someones commentary but how much of it sounds true? I eliminated the second article about Registered Traveler.
Virgin America, Registered Traveler serve up failed promises:
Life on the road has made skeptics and cynics of us all. Too many years of phony upgrades, broken service promises and flat-out lies have given us precious little patience for the phantoms and fantasies of business travel.
So what, then, are we to make of Virgin America and Registered Traveler, two ideas whose time has apparently come and gone without ever actually having arrived? Both of these phantoms briefly stumbled into view this week and were quickly exposed for the fantasies they really are and probably always have been.
First let's talk about Virgin America, one of the longest-running sideshows in the history of business travel. Then we can discuss Registered Traveler, which has turned into a dreary, post-9/11 soap opera.
Virgin Atlantic boss Richard Branson, who often seems to be the entire entrepreneurial class of Britain, first began talking about creating Virgin America in 1999. He then promptly made the blunder of a business lifetime when he chose to bail at the last moment on a deal to slap the Virgin America name on a start-up then known only as New Air. That carrier launched the next year as JetBlue Airways and has helped remake the face of domestic aviation.
Every few months after that, Branson would bamboozle some credulous publication into writing about Virgin America as if it was just moments away from its inaugural flight. Along the way, Branson bought aircraft, hired some of the fools who launched Song, Delta's disastrous attempt to mimic JetBlue, and loaned the paper carrier tens of millions of start-up dollars. By some estimates, Virgin America has already burned through about $60 million, about four times what it took to launch JetBlue seven years ago.
Yet it wasn't until December, 2005, that Virgin America actually applied to the Department of Transportation (DOT) for approval to fly. The application was complicated and convoluted — and it immediately drew fire from existing airline competitors, all of whom claimed that Virgin America was, well, un-American. Critics claimed that Branson was pulling all of the strings at Virgin America, violating federal laws that bar foreigners from owning or controlling U.S.-based airlines.
Even some of Branson's severest critics — yours truly included — thought that the Big Six were protesting too much. Branson may be a braggart and a blowhard, but we figured that the Big Six' objections were simply obstructionist delaying tactics. Even Branson wouldn't be so crazy as to flout federal laws that limit foreigners to 25% of a U.S. carrier, we said. Let the approval process work — it takes the agency an average of more than a year to approve an airline to fly — and Virgin would get its wings in due course, we figured.
But when the DOT did respond three weeks ago, it was to tell Virgin America no. Branson, the DOT has decided, was pulling all of the strings and was, in fact, almost all of the money behind the proposed airline. In the private part of its order, DOT officials found that the $88.9 million promised by U.S. investors wasn't even at risk. The investors held "puts" that would allow them to cash out of Virgin America with a minimum rate of return of 8%.
Virgin America appealed the DOT ruling this week with a startling, 190-page submission. After attacking the DOT as a pawn of the Big Six carriers and whining about the time it took the agency to render a verdict, it got down to cases. To save Virgin America, Branson promised to put his shares in trust and agreed to abandon one of his three board seats. The airline said that, if necessary, it would also fire its chief executive and was prepared to fly some routes without the Virgin name. There were other concessions, too.
But that nagging and apparently crucial issue of the lack of U.S. capital at risk in Virgin America is unchanged. Virgin America's U.S. investors can still bail on the carrier and get their money back with interest. That peculiar and unprecedented state of affairs didn't fly with the DOT three weeks ago, and it probably won't on appeal, either.
While all the regulatory sparring was going on, Virgin America finally went public with some of its operational plans. We still know nothing about its planned fares or where it expects to fly beyond its sole announced route of New York-San Francisco. But what Virgin America did promise this week was a first-class cabin with 55 inches of seat pitch and coach chairs with 32 inches of legroom.
Those might have been snappy specs back in 1999, when Branson began touting Virgin America, but they come up short in 2007. The big dogs on the New York-San Francisco route — American and United — already have more spacious first classes. American offers chairs with 62 inches of legroom and United offers lie-flat beds. And United and JetBlue, which launches on the New York-San Francisco run on May 3, both offer roomier coach seats. United's coach seats have 34 inches of legroom and JetBlue's planes will have 34 or 36 inches.
Virgin also made a big deal of its in-flight entertainment system. Unfortunately, it's essentially the same bug-ridden system once offered by Song. It has some marginal new perks (seat-to-seat text messaging, electronic ordering of in-flight meals), at-seat power receptacles and RJ-45 jacks, but it remains essentially a me-too product created to compete with JetBlue, which pioneered in-flight, at-seat live television.
Virgin America, Registered Traveler serve up failed promises:
Life on the road has made skeptics and cynics of us all. Too many years of phony upgrades, broken service promises and flat-out lies have given us precious little patience for the phantoms and fantasies of business travel.
So what, then, are we to make of Virgin America and Registered Traveler, two ideas whose time has apparently come and gone without ever actually having arrived? Both of these phantoms briefly stumbled into view this week and were quickly exposed for the fantasies they really are and probably always have been.
First let's talk about Virgin America, one of the longest-running sideshows in the history of business travel. Then we can discuss Registered Traveler, which has turned into a dreary, post-9/11 soap opera.
Virgin Atlantic boss Richard Branson, who often seems to be the entire entrepreneurial class of Britain, first began talking about creating Virgin America in 1999. He then promptly made the blunder of a business lifetime when he chose to bail at the last moment on a deal to slap the Virgin America name on a start-up then known only as New Air. That carrier launched the next year as JetBlue Airways and has helped remake the face of domestic aviation.
Every few months after that, Branson would bamboozle some credulous publication into writing about Virgin America as if it was just moments away from its inaugural flight. Along the way, Branson bought aircraft, hired some of the fools who launched Song, Delta's disastrous attempt to mimic JetBlue, and loaned the paper carrier tens of millions of start-up dollars. By some estimates, Virgin America has already burned through about $60 million, about four times what it took to launch JetBlue seven years ago.
Yet it wasn't until December, 2005, that Virgin America actually applied to the Department of Transportation (DOT) for approval to fly. The application was complicated and convoluted — and it immediately drew fire from existing airline competitors, all of whom claimed that Virgin America was, well, un-American. Critics claimed that Branson was pulling all of the strings at Virgin America, violating federal laws that bar foreigners from owning or controlling U.S.-based airlines.
Even some of Branson's severest critics — yours truly included — thought that the Big Six were protesting too much. Branson may be a braggart and a blowhard, but we figured that the Big Six' objections were simply obstructionist delaying tactics. Even Branson wouldn't be so crazy as to flout federal laws that limit foreigners to 25% of a U.S. carrier, we said. Let the approval process work — it takes the agency an average of more than a year to approve an airline to fly — and Virgin would get its wings in due course, we figured.
But when the DOT did respond three weeks ago, it was to tell Virgin America no. Branson, the DOT has decided, was pulling all of the strings and was, in fact, almost all of the money behind the proposed airline. In the private part of its order, DOT officials found that the $88.9 million promised by U.S. investors wasn't even at risk. The investors held "puts" that would allow them to cash out of Virgin America with a minimum rate of return of 8%.
Virgin America appealed the DOT ruling this week with a startling, 190-page submission. After attacking the DOT as a pawn of the Big Six carriers and whining about the time it took the agency to render a verdict, it got down to cases. To save Virgin America, Branson promised to put his shares in trust and agreed to abandon one of his three board seats. The airline said that, if necessary, it would also fire its chief executive and was prepared to fly some routes without the Virgin name. There were other concessions, too.
But that nagging and apparently crucial issue of the lack of U.S. capital at risk in Virgin America is unchanged. Virgin America's U.S. investors can still bail on the carrier and get their money back with interest. That peculiar and unprecedented state of affairs didn't fly with the DOT three weeks ago, and it probably won't on appeal, either.
While all the regulatory sparring was going on, Virgin America finally went public with some of its operational plans. We still know nothing about its planned fares or where it expects to fly beyond its sole announced route of New York-San Francisco. But what Virgin America did promise this week was a first-class cabin with 55 inches of seat pitch and coach chairs with 32 inches of legroom.
Those might have been snappy specs back in 1999, when Branson began touting Virgin America, but they come up short in 2007. The big dogs on the New York-San Francisco route — American and United — already have more spacious first classes. American offers chairs with 62 inches of legroom and United offers lie-flat beds. And United and JetBlue, which launches on the New York-San Francisco run on May 3, both offer roomier coach seats. United's coach seats have 34 inches of legroom and JetBlue's planes will have 34 or 36 inches.
Virgin also made a big deal of its in-flight entertainment system. Unfortunately, it's essentially the same bug-ridden system once offered by Song. It has some marginal new perks (seat-to-seat text messaging, electronic ordering of in-flight meals), at-seat power receptacles and RJ-45 jacks, but it remains essentially a me-too product created to compete with JetBlue, which pioneered in-flight, at-seat live television.
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