Virgin furious as US blocks plans for low-cost airline

Sir Richard Branson's Virgin Group has accused the US government of "pure protectionism" for denying permission for the launch of its planned low-cost airline, Virgin America.

The airline has been forced to consider ways to revise its financial structure to ensure it meets US Department of Transport rules which bar foreign-controlled carriers from domestic routes.

The UK-based Virgin Group reiterated yesterday that it owns just 25 per cent of the wannabe airline, and reacted angrily to the DoT's claims that its influence extends much further. "What the DoT has done is purely political, pure protectionism. They have been heavily lobbied by the legacy airlines in the US, who want to delay the launch or make sure this airline doesn't fly," said Will Whitehorn, head of corporate affairs at Virgin. "We can't believe the decision, and there is no justification for it. We have aircraft on the ground, we have our safety certificate, only 25 per cent is owned outside the US, the company is run by Americans, its chairman is American, its chief executive is American."

The DoT said it was rejecting Virgin America's application for an operating licence after "an extensive review of Virgin's heavily contested submissions", because the close relationship between the airline and the Virgin Group means it is not under the control of US citizens. It cited the Virgin Group's and its executives' involvement in the creation of Virgin America, the funding Virgin Group provided to the carrier, various interlocking financial agreements, and the Virgin Group's ability to influence decisions of the carrier's board. The department also said that the restrictive name-brand licensing agreement between Virgin Group and the airline impedes the carrier's independent decision-making authority.

Virgin America said it would continue to seek ways to launch, and is expected to consider a financial restructuring.

To be certificated as a US airline, a company must show that it is controlled by US citizens, that the president and two-thirds of the board of directors are US citizens, and that at least 75 per cent of the voting interest is owned or controlled by US citizens.