Virgin seeks end to Alaska Airline's citizenship challenge

Posted: Friday, September 04, 2009

ATLANTA - Privately held air carrier Virgin America asked the Department of Transportation on Thursday to deny Alaska Airlines' repeated challenges to its U.S. citizenship status and close the case.

There was no immediate decision by the federal agency. The DOT has said it has been reviewing Alaska Airlines' allegations, which are based largely on news reports that Virgin America insists are inaccurate.

Some analysts say Alaska Airlines and United Airlines would stand to gain if Burlingame, Calif.-based Virgin America, which flies mainly transcontinental routes, were to cease operations temporarily or permanently.

In February, Alaska Airlines, a subsidiary of Seattle-based Alaska Air Group Inc., asked the government to determine whether Virgin America continues to meet the qualifications for being a U.S. air carrier. It cited media reports that called into question Virgin America's compliance with U.S. foreign ownership and control restrictions on domestic carriers.

Alaska Airlines later asked the DOT to issue an order tentatively finding that Virgin America no longer qualifies as a U.S. carrier. On Aug. 21, it repeated its allegations in another filing and again requested that the inquiry of the matter be held in public.

Virgin America said in papers filed Thursday there is nothing new in Alaska Airlines' latest filing. It said the arguments "continue to rely on inaccurate facts and mischaracterizations of department precedent."

"Alaska's renewed motion should be recognized and dismissed for what it is: political and public posturing designed to do nothing more than make a headline and attempt to harm a new competitor that has won numerous awards for its innovative and industry-leading service and product," lawyers for Virgin America said.

Virgin America said it continues to comply with U.S. law regarding its citizenship.

Under U.S. law, foreign ownership in a U.S. air carrier is limited to 25 percent of the voting interest in the carrier.

In March, Virgin America's top executive denied that a foreign entity is holding more than 25 percent of the carrier's voting shares. The Virgin Group, which is controlled by British billionaire Richard Branson, is a minority holder in Virgin America, the airline has said.

The DOT has said it is reviewing transactions proposed earlier this year by Virgin America involving its U.S. shareholders. The agency has not said how long the review would take or what specifically it was looking at.

Alaska Air Group spokeswoman Caroline Boren said Thursday that the review should be transparent. She said Alaska Airlines continues to have concerns about Virgin America's compliance with the law.

Many airlines are struggling financially amid the deep U.S. recession, forcing them to cut capacity and jobs as they seek to bolster their cash positions to weather the downturn.

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