Virgin America’s Sacrifice: Fred Reid on the Block

ReidW200.jpgFred Reid came to Washington the other day to offer to quit. Reid, who used to be the number two at Lufthansa and then was the number two at Delta, now is the number one at Virgin America, where he overseas a fleet of 11 Airbuses that aren’t allowed to fly anywhere.

That’s because the Transportation Department has refused to give Virgin clearance to begin operations, citing the fact that Richard Branson’s UK-based Virgin Atlantic interests are among the chief backers of the San Francisco-based Virgin America. As with most nations, the United States limits foreign investment in and control of airlines based in the country and flying its flag.
To satisfy the DoT, Virgin (America) has arranged new backers, rejigged its financing and limited Virgin Atlantic’s presence on its board. And Reid has offered to resign if that will make the regulators happy enough to clear Virgin (America). The DoT regulators had cited Reid’s close ties with UK citizens in the Branson group as signs that the Brits had a pervasive influence on Virgin (America) management.

Reid added with considerable emphasis that having been born and bred in the San Francisco bay area, he was probably a US citizen, but insisted that he would resign if he had to. The airline would still continue seeking to fly. “The patience and tenacity of our investors is legendary. They are not willing to give up. It is too good of an idea. We have come too far to stop.”

But Reid did acknowledge in response to a question from AB that the carrier had begun leasing out on short-term contracts some of its 11 Airbus A320s while it awaits clearance. It has negotiated two leases with a start-up US carrier that Reid would not name, and is negotiating two more leases to a foreign carrier he declined to identify.

Reid also pointed out that Virgin had added a good American to its board, having named Sam Skinner, the former US transportation secretary, former White House chief of staff who is an executive for a Chicago- based utility, as its vice chairman. Reid also urged people at the Aero Club of Washington lunch where he spoke to sign Virgin’s online petition urging the DoT to clear it.

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