The Wall Street Journal is reporting that
Virgin America Inc., the Burlingame-based brainchild of Sir Richard Branson, expects federal authorities to reject its application to start a low-cost U.S. airline. Competitors had raised concerns that foreigners such as Branson would wield too much influence in the venture.
U.S. law requires that Americans control domestic
airlines flying within the country and that foreigners hold no more than 25 percent of a domestic airline's stock.
Virgin America has been waiting more than a year for a decision.
"We are hearing that there is going to be a negative order coming," Fred Reid, Virgin America's CEO, was quoted in the Wall Street Journal. He expects a decision as soon as next week.
An outright rejection is possible. It's also possible that the Transportation Department will tell the company how it might address concerns raised about foreign control or other matters.
On Tuesday, Donald Carty, Virgin America's chairman and former
American Airlines CEO, was named chief financial officer at computer maker
Dell Inc.
Carty's appointment to the Virgin America board in February had lent cachet to the airline's attempts to get federal approval for its license to fly. Carty also invested an undisclosed amount of money in Virgin America.
A Virgin America spokesman said Carty's new job at Dell would not affect his status as the airline's non-executive chairman. The spokesman declined to say how much time Carty will devote to Virgin America.
The airline has taken delivery of planes and had launched a massive hiring effort. Virgin America had plans to offer low-cost domestic air service like
JetBlue Airways Corp. and
Southwest Airlines Co. One of its first routes will be between San Francisco and New York City.
Branson raised $177 million in startup capital for the airline in December 2005 from U.S. private equity firms and Branson himself.
Rival airlines have objected to Virgin America's application to fly. They questioned whether Virgin America is under control of U.S. citizens, or by Branson. Virgin America has said it complies with U.S. law and that Branson does not control the enterprise.
Virgin America is a separate business from other airlines begun by Branson, including
Virgin Atlantic Airways Ltd., which offers trans-Atlantic service.