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OST-2009-0037 - Virgin America - Petition of Alaska Airlines for Review of Citizenship
OST-2009-0047 - Petition of Aircraft Mechanics Fraternal Association
OST-2008-0107 - Virgin America - Form 41 Confidentiality
Order 2009-1-17 - Virgin America Consent Order - Form 41 Reporting DelinquenciesRepublic, Shuttle America and Virgin America Cash Flow Statements
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OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger February 10, 2009 Petition of Alaska Airlines - Bookmarked Alaska Airlines respectfully requests that the Department immediately open up for public scrutiny and comment any on-going Virgin America continuing fitness investigation or initiate a formal public investigation into the continuing citizenship of Virgin America. Alaska brings this request in the interest of ensuring that a level competitive playing field exists. Many aspects of Virgin America's structure and operations have clearly changed since the issuance of its certificate. There is, however, a paucity of public information about those changes. Alaska is obliged to rely on media reports in commenting on Virgin America's current situation. Alaska brings this request for a simple reason: to ensure all U.S. carriers are held to the same standard of compliance with longstanding U.S. ownership and control laws. Alaska must mould its operation to comply with these laws. Virgin America should be no exception. If Virgin America is not in compliance, this places law-abiding airlines at a competitive disadvantage, because they cannot attract and deploy the same level of capital from non-U.S. citizens. Alaska appreciates that some have sought to change the U.S.' ownership and control restrictions; however, unless and until such change occurs, even-handed enforcement of current restrictions is essential - particularly in the current financial environment - to ensure a level competitive playing field for all U.S. carriers. Counsel: Squire Sanders, Marshall Sinick, 202-626-6600
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger
February 20, 2009 Answer of Air Line Pilots Association The Air Line Pilots Association supports the request of Alaska Airlines, Inc. to open up for public examination and comment any continuing fitness review of Virgin America or to initiate a formal public investigation into Virgin America's citizenship status. Recent capital infusions into the airline and press reports that the airline's largest U.S. stockholders are seeking to divest their holdings raise serious questions about the extent of control exercised over Virgin America by its founding father -- the British Virgin Group. As Alaska points out, Virgin America has been losing money at a rapid rate since beginning operations in August 2007. Moreover, as Alaska asserts, the airline would likely have run out of money last year had it not received loans for $112 million. While the source of the loans has not been disclosed, news accounts suggest that they were at least in part from a British investor. Counsel: ALPA, Russell Bailey, 202-797-4086
February 20, 2009 Answer of Association of Flight Attendants-CWA in Support of Petition of Alaska Airlines Judgments that are made in the initial certification proceeding necessarily draw on the information presented at the time. It is difficult to predict future conduct and the Department has tended to give applicants the benefit of the doubt. In its First Show Cause Order 2006-12-23, DOT identified a number of factors that contributed to its initial assessment that Virgin America was not controlled by U.S. citizens, including the structure of the U.S. citizen hedge fund investors (VA!), Virgin America's reliance on VG's initial financing and indebtedness to VG, and contractual and business relationships that caused DOT to question the independence of the U.S. citizen owners. The Department then indicated that it would accept changes proffered by the applicant as establishing Virgin America's independence from foreign influence. But the validity of this assessment ultimately depends upon the parties' subsequent conduct. Counsel: AFA and Susan Jolie, 703-354-8450
February 20, 2009 Answer of Virgin America to Petition of Alaska Airlines The recent, nearly 18-month long process to establish Virgin America’s citizenship faced opposition by virtually every major carrier except Alaska. Now facing robust and effective competition on its Seattle to Los Angeles/San Francisco routes from a new low-fare, innovative competitor, Alaska is belatedly seeking to revisit the Department’s citizenship determination, rather than devoting its resources to competing with Virgin America in the marketplace. In making its extraordinary request for yet another public proceeding to confirm Virgin America’s citizenship, Alaska points to no evidence of any change in facts or law that would justify reopening the exhaustively reviewed certification proceeding, nor can it point to any relevant legal precedent that supports its position. Instead, it cites to unsubstantiated “media reports” and does just what Virgin America predicted its competitors would when the Department unfortunately chose to make Virgin America’s financial and traffic information public: inaccurately use such information as a weapon to urge governmental officials to shut down Virgin America’s innovative and needed services and competition, even though Virgin America fully complies with U.S. law. The Department should deny Alaska’s unfounded request for a continuing fitness investigation of Virgin America, which underwent the most extensive and expensive citizenship review in the Department’s history. Counsel: Pillsbury Winthrop, Kenneth Quinn, 202-663-8000
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger February 20, 2009 Petition of Aircraft Mechanics Fraternal Association From the outset, Virgin America's ownership structure was suspect and controversial. The carrier eventually met the reasonable demands the Department made to attain the status of U.S. citizenship. Virgin America has recently encountered serious financial difficulties, which have raised the significant possibility that its principal owners will exercise puts regarding their shares, thus turning control of the carrier over to the Virgin Group, a foreign entity not authorized to own and manage a U.S. carrier. Therefore, it is imperative that the Department conduct a full and open review of Virgin America's fitness to continue operating as a U.S. carrier. Counsel: Seham Seham, Lee Seham, 914-997-1346
OST-2009-0047 - Petition of Aircraft Mechanics Fraternal Association March 3, 2009 Virgin America Inc. respectfully requests that the Department consolidate the Petition of Aircraft Mechanics Fraternal Association, Docket OST-2009-0047, requesting public review of Virgin America's citizenship with the Petition of Alaska Airlines Inc., Docket OST-2009-0037, requesting the same relief. AMFA raises no new arguments and cites no new precedent not already raised in the Alaska Airlines Inc. petition. It is in the public interest for the two petitions to be consolidated so that the Department and interested parties only need to respond once to these duplicative petitions. AMFA, as well as the parties that have commented on the Alaska Petition, the Association of Flight Attendants and Air Line Pilots Association, have simply repealed Alaska's misstatements and misunderstandings of Virgin America's operating authority and its requests to revisit matters the Department exhaustively reviewed and decided. As Virgin America stated in its Answer, and as the Department is aware, a decision to exercise the puts docs not disqualify Virgin America as a U.S. citizen. Similarly, Virgin America has already explained the quote that AMFA references was taken out of context and did not relate to any potential changes in ownership - as AMFA erroneously suggests. AFA's concern that increasing Virgin America debt would render it under the control of foreign creditors is similarly misguided. As the Department is well aware. Virgin America's debt agreements have long since been amended to remove any provisions that might allow its creditors to exercise control over the company. Nothing in either AFA's or ALPA's Answer, nor in AMFA's petition, supports a public review of Virgin America's citizenship. Neither AMFA nor Alaska has raised any, much less compelling, arguments that support a departure from the Department's long-standing policy. Virgin America will, as the Department well knows, respond to any questions it may have as to Virgin America's continuing fitness, and the Department will have an opportunity to evaluate any proposed substantial change in Virgin America's ownership in the manner provided in the Department's regulations. Counsel: Pillsbury Winthrop, Kenneth Quinn, 202-663-8000
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger March 12, 2009 The Wall Street Journal of March 10, 2009 reported that the British Virgin Group has now repurchased and owns virtually 100 percent of Virgin America’s voting securities. This development significantly adds to the urgency that the Department take immediate steps to address the fact that, as of some time last week, Virgin America ceased being a U.S. citizen and may therefore not continue to claim U.S. carrier status. It would be difficult to understate the legal ramifications of Virgin America’s two U.S. private equity funds putting the entirety of their respective equity investments back to the Virgin Group. The Department should not allow the retention of cosmetic voting rights by the two U.S. private equity funds to be treated as the equivalent of voting stock ownership as required by the statute. Indeed, the Department and its predecessor have long held that analogous voting trusts may not be used to satisfy the wellunderstood statutory ownership requirements. In light of the heightened urgency surrounding this substantial new development, Alaska now urges the Department to move to issue a show cause order tentatively finding that Virgin America no longer qualifies as a U.S. citizen. The significance of the Virgin Group’s repurchase and payment for virtually 100 percent of Virgin America’s stock has overtaken Alaska’s earlier request that the Department initiate a public inquiry into whether Virgin America continues to qualify as a U.S. citizen. The Virgin Group’s repurchase sometime last week has eliminated any credible basis on which to claim Virgin America still remains a U.S. citizen – an unprecedented statutory violation which only becomes worse with each passing day. Alaska in fact is unaware of any similar circumstance in which the ownership of the stock of a carrier of comparable size has been so clearly called into question. Counsel: Squire Sanders, Marshall Sinick, 202-626-6600
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger
March 23, 2009 Answer of Air Line Pilots Association to Reply of Alaska Air and Motion for Leave to File Virgin America seems to be saying that having the hedge funds continue "to hold" their voting shares even though they no longer have a financial investment in the company is sufficient for citizenship purposes. But if this is to be taken as an assertion that the funds thereby continue to have ownership in -- much less control over -- Virgin America, such an assertion would fly in the face of forty years of DOT and Civil Aeronautic Board case law on ownership as well as "actual control." Indeed, the assertion would be at odds with DOT's analysis in this very proceeding. In the first show cause order DOT found that the hedge funds did not meet the statutory definition of a U.S. citizen because each had a significant portion of its total equity held by foreign entities. Order 2006-12-23. Virgin America attempted to meet this objection by proposing to segregate the foreign investors in the hedge funds so that they were excluded from participating in any profits or losses of Virgin America: in other words, they would be excluded "from receiving any benefit/risk related to their investment in Virgin America." Order 2007-3-16. The Department found that this proposal-- which purportedly "walled off" the foreign investors from participation in Virgin America -- was adequate to permit DOT to determine that the foreign investors did not have sufficient interest in Virgin America to disqualify the hedge funds on citizenship grounds. The same analysis should apply here. The hedge funds now appear to have walled themselves off from any beneficial interest in Virgin America. They, like the walled off foreign investors, should be deemed "not to count" for citizenship purposes. Reduced to its essence, the assertion that the hedge funds should continue to count for actual control purposes even if they have no benefit or risk associated with their stock "holdings," would invite, as Alaska has so aptly put it, the institution of a "rent-a-citizen" regime where any level or form of foreign investment and perhaps management participation is acceptable so long as U.S. citizens nominally retain physical possession of the stock certificates along with the right to vote 75 percent of a carrier's voting shares, even though such U.S. citizens have absolutely no meaningful interest in the economic performance of the carrier. Counsel: ALPA, Russell Bailey, 202-797-4086
March 23, 2009 Answer of Association of Flight Attendants-CWA and Motion for Leave to File Virgin America has insinuated that DOT has already approved confidential documents in the certification proceeding that it asserts preserve U.S. citizen control upon exercise of the Put Agreement. Media reports, no doubt by design, provide very little insight into the factual and legal basis for suggesting that DOT has concluded that Virgin America remains a U.S. citizen. AFA has reviewed all the documents that were submitted in conjunction with Virgin America's initial certification, and specifically the provisions that relate to voting rights. There is no mechanism to satisfy the legal requirement that Virgin America remain at all times under the ownership and actual control of U.S. citizens as defined under DOT precedent. The Association of Flight Attendants-CWA respectfully requests that the Department of Transportation: (1) immediately make available to all interested persons copies of all confidential materials that were submitted in the proceeding in DOT Docket OST-2005-23307, including specifically those provisions on which Virgin America relies to support its assertion that Virgin America is a U.S. citizen, with only appropriate redactions of documents consistent with the President's Memorandum for the Heads of Executive Departments and Agencies, dated January 21, 2009; and (2) immediately initiate a public proceeding with a Show Cause Order tentatively finding that Virgin America, Inc. is not a citizen ofthe United States as required by statute and DOT precedent. Counsel: Susan Jollie, 703-354-8450
March 24, 2009 Answer of Virgin America to Motion of Alaska Airlines Alaska has raised nothing new in its Motion, and just like in its initial Petition, no reason to institute a public proceeding exists. Nothing unforeseen to the Department has occurred, and Virgin America has met and continues to meet all of its notification requirements. Consistent with Department precedent, the Department should not institute a public proceeding where an informal review is more appropriate. Nor should it issue a Show Cause Order to ultimately ground a rapidly expanding, competitive, and innovative U.S. carrier that currently employs over 1,400 people nationwide. Alaska has demonstrated that it can do no more than tell the Department what has been publicly reported in the press, but has not otherwise provided any basis to justify either its initial Petition or its subsequent Motion. Counsel: Virgin America and Pillsbury Winthrop, Kenneth Quinn, 202-663-8000
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger April 2, 2009 Re: Oberstar Letter to Secretary of Transportation Ray LaHood I am writing to you concerning questions that have arisen regarding the citizenship of Virgin America, Inc. and, in particular, the report in the March 10, 2009, Wall Street Journal that the U.S. private equity funds that own the majority of Virgin America's voting stock have transferred all financial interest in their shares to tbe British-based Virgin Group. If these reports are accurate, it calls into question whether Virgin America continues to meet the requirements for holding a certificate as a U.S. air carrier. If the equity funds have no further stake in the success of the company, there is a serious question as to whether their continued title to the shares is sufficient grounds for them to be considered as the owner of the stock, for purpose of the statutory requirement that a U.S. carrier must have 75 percent of its voting stock owned or controlled by persons that are citizens of the United States. If the Virgin Group has all of the financial interest in tbhe stock, it would seem to be tbe owner for purposes of the citizenship requirement. Several groups, including Alaska Airlines, have asked the Department of Transportation to hold a public inquiry to examine whether Virgin America can still be considered a U.S. citizen. I fInd it signifIcant that in its answers opposing these petitions, Virgin America does not deny that there has been a sale or other transfer of financial interest in the stock. If Virgin had been able to make this denial, it presumably would have done so, since this would be a strong, if not irrefutable, argument for denial of the requests for an investigation. The Department should undertake a comprehensive review of the accuracy of the reports that the U.S. private equity funds have sold or otherwise disposed of all financial interest in their shares in Virgin America. If the Department finds that the equity funds have disposed of their financial interest, then I strongly urge the Department to conduct a public proceeding to examine the question of Virgin America's citizenship. By: James Oberstar
June 2, 2009 Re: Ex-Parte Letter to Chairman James Oberstar Thank you for your letter of April 2 to Secretary LaHood concerning the citizenship of Virgin America, Inc. Earlier this year. Virgin America informed the Department of proposed transactions involving its United States shareholders. Presently, the Department is reviewing these transactions and the results of this review will inform any future action of the Department on this matter. As you are aware, subsequent to press reports announcing Virgin America's transactions, Alaska Airlines, Inc. filed a petition in the docket requesting that the Department conduct a public review of Virgin America's citizenship. Several pleadings from interested parties were filed in response to Alaska's petition. Since this matter is contested, I am unable to comment on its merits. I can, however, assure you that the Department is reviewing the information provided by the interested parties. By: Roy Kienitz
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger August 21, 2009 Renewed Motion of Alaska Air for a Public Proceeding Almost six months have passed since Cyrus Capital Partners L.P. and Black Canyon Capital LLC, the two U.S. hedge funds holding 75 percent of Virgin America’s voting stock, exercised puts that surrendered back to the British Virgin Group all of the economic rights traditionally associated with being a shareholder. Alaska Airlines is of the view that Virgin America has lost its status as a U.S. carrier and has therefore been operating illegally ever since these rights were exercised. It also appears, based on the limited publicly available information and the absence of any statement to the contrary, that the Department now considers voting rights stripped of any economic interests to satisfy U.S. citizenship requirements or has provided Virgin America a “grace period” in which to find replacement U.S. investors. Either scenario raises difficult statutory and policy issues. Alaska therefore renews its request for a public review of Virgin America’s current and prospective citizenship status.
Alaska is not alone in its concerns. Two aviation leaders in Congress - Senator Patty Murray, Chairperson of the Senate Transportation, Housing and Urban Development, and Related Agencies Appropriations Subcommittee, and Congressman James Oberstar, Chairman of the House Transportation and Infrastructure Committee - have also called for the Department to address Virgin America’s apparent non-compliance with U.S. citizenship and ownership requirements. Counsel: Squire Sanders, Marshall Sinick, 202-626-6600
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger July 28, 2009 Re: Ex-Parte Letter to Senator Patty Murray (D-WA) By: Roy Kienitz
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger August 31, 2009 Answer of Aircraft Mechanics Fraternal Association in Support of Renewed Motion of Alaska Air The Aircraft Mechanics Fraternal Association files this Answer in support of the Renewed Motion of Alaska Airlines, Inc. requesting that the Department of Transportation open to the public its continuing review of Virgin America's status as a U.S. citizen. As Alaska points out in its Renewed Motion, dated August 21, 2009, serious questions have lingered for years concerning the ownership and actual control of Virgin America. Counsel: Seham Seham, Lee Seham, 914-997-1346
September 1, 2009 Answer of Air Line Pilots Association in Support of Renewed Motion of Alaska Air The Air Line Pilots Association supports the renewed request of Alaska Airlines, Inc. to open up for public examination and comment the Department's ongoing review of Virgin America's citizenship status. As Alaska rightly observes, recent press reports suggest that changes to Virgin America's ownership structure raise fundamental questions about its ownership status. Those reports suggest that the airline's largest U.S. "stockholders" now bear no risk of loss with respect to their holdings. Since "risk of loss is an integral aspect of a genuine ownership interest," if the reports are true, the stockholders are not genuine owners within the meaning of the Department's historic interpretation of the U.S. citizenship requirements for air carriers. See Order to Show Cause 2007-3-16. As a result, Virgin America should no longer qualify as a U.S. citizen under the law. Counsel: ALPA, Russell Bailey, 202-797-4086
September 1, 2009 Answer of Association of Flight Attendants-CWA in Support of Renewed Motion of Alaska Air The Association of Flight Attendants-CWA answers in support of the Renewed Motion of Alaska Airlines, Inc. for a Public Proceeding to examine the continuing fitness of Virgin America, Inc., which is under the influence of Sir Richard Branson and his Virgin Group affiliates. Ample evidence has been provided over the last 6 months to support the inference that VA no longer satisfies-if it ever did-the statutory requirement of U.S. citizenship. Counsel: Susan Jollie, 703-354-8450
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger September 1, 2009 Answer of Virgin America to Renewed Motion of Alaska Air Alaska’s Renewed Motion offers nothing new for the Department to consider. Virgin America continues to comply with U.S. law regarding its citizenship. The latest Alaska filing is merely a reiteration of its earlier arguments for a public proceeding - arguments that continue to rely on inaccurate facts and mischaracterizations of Department precedent in continuing fitness and citizenship matters, including the Department’s order granting Virgin America its certificate (See Order 2007-8-17, issued August 17, 2007). 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. Indeed, given the lack of any new or substantive issues raised by Alaska or others, Virgin America respectfully requests that the Department close the docket on this matter and deny Alaska’s multiple petitions. In its latest effort, Alaska repeats it circular argument that it cannot demonstrate the need for a public proceeding because of the confidential nature of the Department’s standard informal process, and that therefore the Department should institute a public proceeding and release Virgin America’s confidential information. However, Alaska’s request has no more basis in Department precedent now than it did when it first made this argument in February. Counsel: Pillsbury Winthrop, Kenneth Quinn, 202-663-8000
OST-2005-23307 - Certificate of Public Convenience and Necessity - Interstate Scheduled Passenger September 4, 2009 Answer of Transport Workers Union of America in Support of Renewed Motion of Alaska Air TWU has reviewed Alaska's Motion and fully agrees with Alaska that further examination of the citizenship status of Virgin America is warranted. As Alaska's Motion points out, publicly reported events, if correct, raise serious questions whether Virgin America satisfies U.S. carrier ownership requirements. As a result, an appraisal of Virgin America's ownership situation (or any contemplated new ownership situation) needs to be conducted and Alaska's Motion should be granted. TWU only became aware of this proceeding in recent days and required until today to complete its internal clearance processes. And since this matter has been pending since March, no interested party will be prejudiced by the TWU's late filing. Accordingly, good cause exists for the Department's acceptance of the TWU's answer. Counsel: David Rosen, 212-259-4900
Order 2010-1-5 Issued and Served January 8, 2010 On February 10, 2009, Alaska Airlines, Inc. filed a petition to institute a public inquiry into the citizenship of Virgin America, Inc. Specifically, the air carrier “move[d] the Department to immediately initiate an investigation into Virgin America’s citizenship and to conduct that investigation on the public record.” Alaska cites various changes in Virgin America’s structure and capitalization, and argues that such an investigation should be conducted with formal, public procedures to ensure greater transparency. On February 20, 2009, the Aircraft Mechanics Fraternal Association filed a similar petition. Alaska filed a renewed motion on August 21, 2009, arguing that developments since its initial petition supported conducting a public investigation of Virgin America’s citizenship. We are not persuaded that the public interest requires us to institute a public proceeding in this matter. As petitioners acknowledge, it has long been the Department’s practice to conduct continuing fitness reviews informally. We have determined that an informal continuing fitness review is appropriate here. We have completed such a review of Virgin America’s fitness, and have concluded that Virgin America remains a US citizen, subject to certain conditions. The Department has made public a detailed description of the Department’s review as well as its conclusions and the conditions imposed on Virgin America in a January 8, 2010, letter to the air carrier. By: Susan Kurland
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