DOT Grants Virgin America Tentative Approval to Fly

Virgin America won tentative approval from the U.S. Department of Transportation March 20 after the federal agency ruled that the airline’s change in its ownership and management structure would be acceptable under federal law restricting foreign ownership and control of the airline.

The DOT had denied Virgin America’s request to begin flying out of San Francisco International Airport last December. The agency ruled on objections made by Continental Airlines and other U.S. carriers that Virgin America is controlled by British citizen and billionaire Richard Branson and his Virgin Group, which owns 25 percent of Virgin America. Under U.S. law, a U.S. airline must be 75 percent owned and controlled by American citizens. The DOT ruled in December that the airline did not meet the requirements that foreigners don’t have “actual control” of an airline and hold no more than 25 percent of voting equity.

In January, the company—based in Burlingame—said it made “sweeping changes” in a revised application to the U.S. Department of Transportation. The changes include reducing the powers of Branson’s Virgin Group, surrendering some of the Virgin Group’s veto power on company decisions and transferring voting shares to a U.S. trustee. Virgin America’s CEO Fred Reid also said foreign investors would be striken from its majority U.S. investment ownership group.

In its March 20 ruling, the DOT added the condition that Reid, the former Delta Air Lines president hired by Branson, be replaced by a CEO “who has no prior affiliation” with Branson’s Virgin Group.

Unions affiliated with the San Mateo County Central Labor Council have opposed Virgin America, pointing to its anti-union policies and statements by Branson. The Labor Council’s Airport Labor Coalition voted to oppose Virgin America in light of recent actions by the start-up airline. After first indicating he would purchase jets from Boeing, made by members of the International Association of Machinists and Aerospace Workers, Branson announced that Virgin America would purchase a fleet of European-made Airbuses. (Tens of thousands of workers at Airbus walked off the job last month in Germany, England and Spain to protest plans by Airbus to cut 10,000 jobs.) Virgin America also recently contracted with anti-union subcontractors at SFO.

San Mateo County Central Labor Council Executive Secretary-Treasurer Shelley Kessler said that if Virgin America does get final approval, the airline should be a good corporate citizen. “We will work with our elected officials and through our unions to make sure that Virgin maintains industry standards for workers and that those standards aren’t further eroded,” she said.

Local elected officials have expressed support for Virgin America, which says it will bring up to 3,000 jobs to the Bay Area. Kessler said that, “We encourage our elected officials to join with us in being vigilant to make sure Virgin America’s workforce is compensated with livable wages, good benefits and pensions, and that workers’ rights are respected.”

The Association of Flight Attendants has long opposed Virgin America over the issue of foreign ownership. In a statement issued March 21, the AFA said that the DOT approved Virgin America’s application, “…despite the fact that the revised application still shows that it is under foreign ownership. The DOT ruling contends that Virgin America ‘stills falls short of the rigorous standards we apply when determining if U.S. interests have actual control of the airline.’ The decision comes just days before a controversial treaty between the European Union and the United States will be decided by European officials.”

“This ruling is hypocritical and nothing but a trade off to buy European approval of the US/EU treaty,” said Patricia Friend, AFA-CWA International President. “The DOT is completely ignoring their own well established rules that have protected the U.S. aviation industry and its employees for years. This decision by DOT is just one more bad trade deal at the expense of American workers.”

“The U.S. aviation industry is just finally starting to recover from a dark period and now our government wants to throw it another curve ball which it clearly can not handle at this time,” said Friend. “Once the market is open to foreign competition and foreign controlled airlines begin to take off in the U.S., their success will come on the backs of current airlines and employees. Once the increased competition comes in and the price wars begin, airlines will once again turn to their employees to bail them out of a financial hole. Every job created will be at the expense of an existing job that will be lost or diminished.”

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