Is Virgin America At Least 75 Percent American?

Is Virgin America under foreign control? That’s what Virgin America competitor Alaska Airlines would like the U.S. Department of Transportation to find out. The federal agency, which requires all domestic airlines to be 75 percent American-owned, was asked by Alaska to go over Virgin America’s recent business dealings.

According to an article last month in the Financial Times, Virgin America shareholders were abandoning the company and it was unknown whether or not the London-based Virgin Group would be its sole owner. Sir Richard Branson’s Virgin Group started Virgin America in 2005, using Black Canyon and Cyrus Capital Partners hedge funds to “skirt U.S. law preventing foreign entities from owning a controlling stake” in a U.S. airline. The article went on to say that Branson hired Lazard to find more investors in the two funds or risk both pulling out of the deal, leaving minority owner Virgin Group as the only owner. Virgin America argued that it’s in full compliance with U.S. laws.

Obviously Alaska is a competitor with Virgin on several West Coast routes which is why it has a dog in this fight. It would likely celebrate if the federal government took away Virgin America’s certification. And while usually this kind of story would just be considered sour grapes, there seems to be a little more to this controversy.

Branson told the Boston Herald he spent 20 years trying to enter the U.S. airline business, but was “stymied” by laws preventing foreign ownership. He also added that the U.S. airline industry needed to be “shaken up,” something in which his Virgin Group specializes. “It’s fun to go out and improve an industry,” he told the Herald.

Does anyone really believe that self-made billionaire businessman Branson was “stymied” or confused in any way about U.S. airlines? Hardly. But he was obviously playing spin doctor on recent reports that say he’s trying to circumvent federal laws, which to most Americans, sounds pretty arrogant – especially from a foreigner trying to profit in this country.

His flimsy deal with two hedge funds is crumbling, and I certainly get the feeling Branson would like nothing more than the federal government turning a blind eye to who is really controlling the domestic airline. In this instance, I think Alaska is acting in its own interests, but sometimes that’s not bad for the industry or the country.

Photo courtesy of Virgin America