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Alaska Airlines questions Virgin America status

  Alaska Airlines has again called on the U.S. Department of Transportation to address questions about Virgin America’s compliance with U.S. foreign ownership and control restrictions on domestic carriers.In a filing today, Alaska asked DOT to promptly issue an order tentatively finding that Virgin America no longer qualifies as a U.S. carrier. This filing followed a petition to DOT in February asking the department to initiate a public investigation.

Federal law requires U.S.-based air carriers to be U.S. “citizens.” To qualify, the outstanding voting interests of the air carrier must be at least 75-percent owned by U.S. citizens and the carrier must also be effectively controlled by U.S. citizens.

In its filing, Alaska Airlines cited a March 9 Wall Street Journal story reporting that U.S.-based investors in Virgin America had exercised their rights to sell back their almost 77 percent of the startup carrier’s capital to the London-based Virgin Group Ltd., according to people familiar with the situation. In the story, Virgin America refused to say whether there had been such a transaction. No new U.S. investors have committed to buying stakes, according to people familiar with the situation, which could make Virgin America essentially wholly owned by the Virgin Group.

“This latest newspaper report underscores the urgent need for rigorous and transparent action to address Virgin’s apparent violation of foreign ownership and control restrictions,” said Keith Loveless, general counsel for Alaska Airlines. “Alaska makes this request to ensure all airlines are held to the same standard of compliance with U.S. law, and we hope the DOT acts quickly to address the issues surrounding Virgin’s equity ownership and actual control.”

Virgin America’s compliance with U.S. citizenship requirements was a point of controversy and debate during its certification proceeding. DOT initially determined that Virgin America, which was founded by the British Virgin Group, did not comply and required the company to restructure before granting initial certification.