Virgin America Inc., the discount airline that has received both
high praise for its product and criticism for its ownership structure, is reportedly seeking approval from U.S. regulators to revamp the latter.
The Burlingame, Calif.-based airline, 24% owned by Richard Branson's Virgin Group Ltd., has been the target of complaints by rivals over whether it is truly a U.S.-controlled entity, as required by law. The airline won initial approval to fly from the Department of Transportation after a prolonged fight by selling more than 75% of its equity to U.S. investors.
In recent months, Alaska Airlines Inc. (NYSE:ALK) and others have asked the DOT to reconsider whether Virgin America fits the criteria to be considered U.S. owned after reports that the company's initial U.S. investors planned to exercise their option to sell their initial $150 million investment.
According to a Financial Times report Friday, the airline is seeking DOT approval for a plan to receive new capital from a group of investors that includes Cyrus Capital Partners, one of its original shareholders. That investment could be for less than the original $150 million, the FT said, though details of the plan were uncertain.
Also uncertain is whether the plan will satisfy any lingering concerns about who controls Virgin America. With Cyrus able to cash in its initial investment for a profit and jump back in, critics are sure to argue that the U.S. funding is more of a loan than an equity stake, casting fresh doubt over Virgin America's citizenship.
Brett Snyder, writing for BNET on the travel industry,
thinks that DOT will look at the transactions and "they might have to think twice about whether it should really just be considered debt instead."
"It will be interesting to see where this goes, and if the DOT decides to keep pushing or not," Snyder writes. Indeed. -
Lou Whiteman
Lou Whiteman is a senior writer covering the automotive, transportation and industrial sectors. Follow him on Twitter @louwhiteman
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