Virgin America is on course to begin US flights in summer after enlisting new investors and government officials in a successful campaign to reverse federal rejection of its application to fly.

The US Department of Transportation ruled in December that the low-cost carrier's relationship with Sir Richard Branson and its backing by overseas investors, including Virgin Atlantic affiliates, put it in violation of statutes limiting foreign investment in and control of US carriers.

But Virgin America has since found new backers with US citizenship, revised its financial and management structure to keep the role of Branson's affiliates at a minimum and offered to dismiss chief executive Fred Reid to satisfy the regulator that its management was free of Branson's influence.

Fred Reid    

Fred Reid faces an uncertain future after Virgin America offered to dismiss the chief executive to satisfy DoT regulators

All the revisions satisfied DoT regulators, which tentatively cleared the carrier in March. The major airlines that had opposed Virgin did not renew their opposition after the tentative approval was announced, practically guaranteeing final clearance for Virgin America.

American Airlines, for one, formally stated that it would not oppose the revised Virgin America plan. The only objection came from the Association of Flight Attendants.

Virgin America is now arguing that Reid should be allowed to stay. His role would seem to be the only undecided factor. The carrier plans to starts transcontinental low-fares flights this summer from San Francisco and is continuing to market itself widely as a mix of discount fare and very high service levels. It is sufficiently confident of its plans that it began installation of an in-flight entertainment system on its Airbus A320s. Virgin designed the entertainment system itself and will use it to sell food on board as well as offer films, games and other entertainment.

But the carrier will face a changed marketplace when it begins flights as other low-fare carriers have bolstered their services while Virgin was tied up in regulatory wrangling. For instance, JetBlue Airways began flights in early May between San Francisco and New York JFK and Boston Logan with service levels similar to those of Virgin America. Southwest Airlines has also unveiled plans to resume service at San Francisco in the autumn with at least 14 daily flights. Southwest, JetBlue and ATA Airlines also serve nearby Oakland.


Source: Airline Business