The decision, announced after two days of talks in Washington, does not bode well for hopes that Britain and the US will meet their target of achieving an open skies pact across the Atlantic within the year.
The US negotiators blocked the transfer of the Virgin service on the grounds that the additional rights offered to US carriers in exchange - one new route to Stansted and another to either Manchester or Birmingham - were inadequate.
Richard Branson, chairman of Virgin Atlantic, said last night: 'We are obviously disappointed that the decision did not go well because Boston would be much better served from Heathrow. But we hope to be successful in the next round of talks.'
Aviation sources suggested that the UK may have to grant Northwest, the other US airline operating Gatwick- Boston, rights to fly from Detroit to Gatwick in order for the US to approve the Virgin switch.
Meanwhile, the focus of attention is set to swing back to the battle between Virgin and BA for greater access to transatlantic routes. The two airlines are due to appear before a Civil Aviation Authority hearing late this month at which Virgin will seek authority to replace BA on some of its Heathrow-San Francisco services.
BA now flies twice daily to the West Coast city. Virgin says that it will not be able to launch a rival service unless it gets half of BA's slots.
Virgin last night began operating a third daily service from Heathrow to New York with a leased Boeing 747.Reuse content