Virgin America nears its first time aloft

untitled.bmpIt ain’t easy being a Virgin: after two years of trying to get off the ground, Virgin America has finally approached the departure gate, sort of. The carrier, which either is or isn’t the brainchild of Virgin Atlantic founder Richard Branson and either is or isn’t Branson’s first US franchise, depending on who’s arguing. The airline has sought US approval since 2004, and has either been rebuffed by regulators, or at least rebuffed after they had ignored it for months running. The problem: Branson had money in the new carrier and had lent his name to it, and even though Virgin America was based near San Francisco and had hired US airline executives, opponents argued that it failed the long-standing US limits on foreign non-citizen control of a US-flag carrier. Other carriers, ennobled only in their desire to see the law upheld and eager to meet any competition in the marketplace rather than in the regulatory arena, led the opposition, while organised labour in the form of the Air Line Pilots Association and the Association of Flight Attendants opposed the Virgin plan to hire people.

After a rejection right round Christmas, the airline reworked its finances, removed any veto power that Branson and his allies might have and established a voting trust for Virgin Atlantic’s shares, gave a greater share to US investors, gave the US investors more control of the board and said Virgin America chief executive Fred Reid would resign if that would satisfy the regulators. Sorry, Fred, but they’ll take you up on; that the Transportation Department said that Fred, the former number two at Delta and before that the number two at Lufthansa, would have to depart because he “might be ‘beholden’ to foreign interests”. The changes that Virgin America has already made though satisfied the agency to give a tentative okay to the carrier, which hopes to starts flights by this summer. now comes the question, assuming that the tentative becomes final, and that is exceedingly likely, given DoT’s past practices, what happens to the Virgin Atlantic strategy of flying out of San Francisco International (SFO) on cross-county routes. Transcon flights are no longer the easy money they were a few years back, with a reinvigorated set of legacy carriers such as United and its Boeing 757 ‘PS’ service on the routes, or American with its plan to add a sixth Boeing 777 to the SFO-JFK route with a new business class cabin; worse, for Virgin America, San Francisco’s not exactly devoid of low-fares carriers. Southwest is going back into SFO this autumn, in addition to its big Oakland operation across the bay, and so is JetBlue, while Frontier Airlines has a low-fares operation at SFO. The Virgin plan is premised on its high levels of in-flight service, but even the biggest television screens have to be pretty bright to compete with frequent-flyer points good anywhere American or United goes.

Some question the timing of the DoT’s action, coming so closely after the other big tentative breakthrough, that between the United States and the Europeen Union over liberalisation or ‘open skies’ across the North Atlantic. Pat Friend, head of the flight attendants union and a vocal opponent of the Virgin America plan, was really pointed. The DoT ruling, she says on behalf of 55,000 union members, puts the industry in the hands of foreign competitors, and the decision “is nothing but a trade-off to buy European approval of the US/EU treaty”. The European Commission votes on the tentative US/EU agreement later this month.

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