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Virgin must make changes
to retain U.S. citizenship
DOT rejects calls by Alaska,
unions for public inquiry on ownership
January 8, 2010
The U.S. Department of Transportation today rejected formal requests by Alaska Airlines and several labor groups calling for a public inquiry into Virgin America’s ownership. At the same time, the DOT stipulated changes that will bring the carrier into compliance with U.S. law requiring domestic airlines to be 75 percent owned and controlled by U.S. citizens.
According to the DOT, a 25-percent equity stake in Virgin is held by The Virgin Group, controlled by British entrepreneur Richard Branson. The government’s ruling requires Virgin America to implement a revised ownership plan to ensure the remaining 75 percent of the company’s voting stock will continue to be under the ownership and actual control of U.S. citizens.
“The fact that the Department of Transportation is requiring Virgin America to secure new investors and change the makeup of its board of directors substantiates what we’ve been concerned about all along — that the company is not currently in compliance with U.S. law,” said Keith Loveless, vice president of legal and corporate affairs. “As such, we’re heartened to see the DOT has required further investment by U.S. entities and other significant changes to their governance structure as a condition to the department’s conclusion that Virgin America is a U.S. citizen. However, we’re disappointed the DOT chose to conduct its review behind closed doors and without public review or comment.”
Virgin America must now secure new investment capital from entities other than The Virgin Group. Among potential investors listed by the DOT are Cyrus Aviation Investor, a private limited partnership; Virgin America’s senior management team; former U.S. Transportation Secretary Sam Skinner, who serves on Virgin’s board of directors; and Virgin’s own employees, who would receive a loan from the airline to buy a 16.7-percent equity stake in the company.
“While we don’t agree with the DOT’s decision on a public hearing, the best thing we can do is continue a strategy that’s served us very well — focus on things we can control,” CEO Bill Ayer said. “That means delivering the kind of sincere and reliable service to our customers that’s earned us two J.D. Power awards. It means keeping a sharp eye on costs so we can match discount fares on Virgin, Southwest and other airlines while making an adequate profit. And it means all of us must keep spreading the word about Alaska so more travelers choose us over the other guys. Those kinds of efforts just helped us get through one of the worst years ever in this business in very good shape. If we maintain that focus, we’ll fend off this latest newcomer — just like we’ve been doing with other competitors for decades.”
The Alaska Air Group Employees Labor Coalition actively supported Alaska Airlines’ petition calling for a public inquiry into Virgin’s ownership. The labor coalition is comprised of six unions representing employees at Alaska Airlines and Horizon Air. Sen. Patty Murray, D-Wash., and Democratic Rep. James Oberstar of Minnesota, chairman of the House Transportation and Infrastructure Committee, also urged the DOT to conduct a public inquiry.
The DOT originally certified Virgin America’s citizenship status in August 2007. The airline later notified the department of a significant potential shift in its shareholder makeup. As a result, the DOT launched a review into whether Virgin would continue to meet U.S. citizen requirements.
to retain U.S. citizenship
DOT rejects calls by Alaska,
unions for public inquiry on ownership
January 8, 2010
The U.S. Department of Transportation today rejected formal requests by Alaska Airlines and several labor groups calling for a public inquiry into Virgin America’s ownership. At the same time, the DOT stipulated changes that will bring the carrier into compliance with U.S. law requiring domestic airlines to be 75 percent owned and controlled by U.S. citizens.
According to the DOT, a 25-percent equity stake in Virgin is held by The Virgin Group, controlled by British entrepreneur Richard Branson. The government’s ruling requires Virgin America to implement a revised ownership plan to ensure the remaining 75 percent of the company’s voting stock will continue to be under the ownership and actual control of U.S. citizens.
“The fact that the Department of Transportation is requiring Virgin America to secure new investors and change the makeup of its board of directors substantiates what we’ve been concerned about all along — that the company is not currently in compliance with U.S. law,” said Keith Loveless, vice president of legal and corporate affairs. “As such, we’re heartened to see the DOT has required further investment by U.S. entities and other significant changes to their governance structure as a condition to the department’s conclusion that Virgin America is a U.S. citizen. However, we’re disappointed the DOT chose to conduct its review behind closed doors and without public review or comment.”
Virgin America must now secure new investment capital from entities other than The Virgin Group. Among potential investors listed by the DOT are Cyrus Aviation Investor, a private limited partnership; Virgin America’s senior management team; former U.S. Transportation Secretary Sam Skinner, who serves on Virgin’s board of directors; and Virgin’s own employees, who would receive a loan from the airline to buy a 16.7-percent equity stake in the company.
“While we don’t agree with the DOT’s decision on a public hearing, the best thing we can do is continue a strategy that’s served us very well — focus on things we can control,” CEO Bill Ayer said. “That means delivering the kind of sincere and reliable service to our customers that’s earned us two J.D. Power awards. It means keeping a sharp eye on costs so we can match discount fares on Virgin, Southwest and other airlines while making an adequate profit. And it means all of us must keep spreading the word about Alaska so more travelers choose us over the other guys. Those kinds of efforts just helped us get through one of the worst years ever in this business in very good shape. If we maintain that focus, we’ll fend off this latest newcomer — just like we’ve been doing with other competitors for decades.”
The Alaska Air Group Employees Labor Coalition actively supported Alaska Airlines’ petition calling for a public inquiry into Virgin’s ownership. The labor coalition is comprised of six unions representing employees at Alaska Airlines and Horizon Air. Sen. Patty Murray, D-Wash., and Democratic Rep. James Oberstar of Minnesota, chairman of the House Transportation and Infrastructure Committee, also urged the DOT to conduct a public inquiry.
The DOT originally certified Virgin America’s citizenship status in August 2007. The airline later notified the department of a significant potential shift in its shareholder makeup. As a result, the DOT launched a review into whether Virgin would continue to meet U.S. citizen requirements.
