Virgin America

[concorde001]

As expected, the US Department of Transport has denied Virgin America's application to begin flights on the grounds that it fails to meet laws regarding foreign ownerhsip (current limit is 25%).

Bloomberg Article (http://www.bloomberg.com/apps/news?pid=20601103&sid=agpl_rf9il98&refer=news)

US DoT Order (http://dmses.dot.gov/docimages/pdf99/434510_web.pdf)

[Queenslander]

This could get very interesting, with the Americans saying no to virgin, what is the probability that the Europeans will say no to the additional American airlines accessing Heathrow?

[flyboyike]

This could get very interesting, with the Americans saying no to virgin, what is the probability that the Europeans will say no to the additional American airlines accessing Heathrow?

What's at issue here is not whether Virgin group can fly to the US (Virgin Atlantic operates numerous dailies here), but whether they are to be permitted to establish a domestic operation flying domestic flights in the US. How many American carriers operate domestic flights in the UK?

[scruggs]

What will happen to the airbus frames already delivered? Oh - and the hired staff?

[matt_hooks]

What's at issue here is not whether Virgin group can fly to the US (Virgin Atlantic operates numerous dailies here), but whether they are to be permitted to establish a domestic operation flying domestic flights in the US. How many American carriers operate domestic flights in the UK?

Sounds like they are looking for cabotage rights. They are very unlikely to get them. I'm not aware of any countries that will allow a foreign carrier to run domestic flights. OK it could be said that's exactly what Ryanair do in the UK but it's not quite the same.

The denial is perfectly legal. There is no compulsion for a country to allow anyone these rights.

[jimworcs]

How is Ryanair operating flights in the UK different from UK based airlines operating in the US? Both are sovereign states. Any European airline can operate any route within Europe regardless of where the airline is registered.

Second, Virgin structured the deal in such a way that US interests owned over 75% of the company and so felt that their submission was within the law. However, Congress are highly touchy and protectionist, as evidenced by their ridiculous reaction to the P&O Ports takeover by Dubai. What is so special about airlines that they need such protection? The vast majority of world wide conglomerates are US based and it is hypocritical of them to refuse to allow Virgin to start services. It is not ownership that this has been denied on, but a more subjective test of "influence".

It is time to challenge this protectionist crap.

[Imhotep]

] How many American carriers operate domestic flights in the UK?
Within Europe, UPS operate flights with N reg aircraft and US crews

[Flame]

How many American carriers operate domestic flights in the UK?


Showing my age here....I remember Pan Am and TWA operating within Europe some years back..but cannot remember why they stopped, perhaps because they went out of business..??

[Al Fakhem]

Showing my age here....I remember Pan Am and TWA operating within Europe some years back..but cannot remember why they stopped, perhaps because they went out of business..??

Those were flights to and from Berlin, where Lufthansa were not permitted to fly to in those days.

[Wino]

Jimworcs

Virgin did NOT structure the deal properly within US law. They just said they did.

Look here
http://www.planebuzz.com/
and more interestingly here for the actual dot filing
http://dmses.dot.gov/docimages/pdf99/434510_web.pdf

and you will see that they are not even close to being in compliance, no matter what their press agent might say.

Cheers
Wino

[Ignition Override]

So much has already been lampooned, satirized and ridiculed about the US airline industry's inability/discipline to regulate the over-bloated, chronic seat-capacity and pricing problems.

Other than the ownership factor, another airline will never help the situation.
Ryanair has operated non-stop from US major airports to Mexico-3rd or 4th freedom cabotage?
T
he Lead Purser on one Ryanair flight attendant crew, with whom I chatted in Milwaukee (MKE), lived in Dusseldorf (DUS), or so she told me.
They all wore the nice, Lufthansa-style yellow scarves :) . Attraktiv, nicht?

[ETOPS]

Ignition Override

A bit of post holiday confusion?

It's Ryan Airlines your Purser friend works for not Ryanair..........:)

[touch&go]

matt_hooks

you'll find AirBerlin operate within the uk, STN to Man and STN to GLA are two I have flown on and the safety demo was in German.

[zed3]

United used to fly Brussels LHR with a B727 as a feeder for the trans atlantics and I think from other European points , around 12 years ago . Delta also did the same I seem to remember .

[waterpau]

you'll find AirBerlin operate within the uk, STN to Man and STN to GLA are two I have flown on and the safety demo was in German.

I thought the open skies in Europe allowed this. On the other side of the coin, Easyjet have permanent bases in Paris and Madrid flying within Europe on British registered aircraft.

There are two sides to the argument; while it's hypocritical of America to apply foreign ownership restrictions to operations within the US, it is intended to protect the value of the market and ensure US citizens get a look in. Protectionist, yes, but it's demonstrative of a wider problem. You only have to look at the number of UK PLCs being bought by foreign private equity in the UK and then being delisted from the markets. The companies are 'streamlined', and potentially stripped of assets, before being sold on at a large profit. That profit then goes in the pocket of already rich private investors rather than into, say, UK pension funds for your average UK Joe.
You can't blame the US for looking after its interests of its citizens.

If there is indeed any money to be made from the US domestic lo-co market, surely it doesn't belong in Sir Richard's pocket.

waterpau, rummaging for a red flag...

[little bird]

Is it any more or less appropiate than R Branson making money off the Australian lo-co market.
While the established airlines will undoubtably be pleased by this decision, is it really good news for the average american. All those potential jobs that now won't happen, and the extra competition, which is usually good for the consumer.

[ExSimGuy]

Prior to Gulf-One and the subsequent demise of the airline, Pan-Am had a base/hub in Frankfurt, from where they operated to (at least) LON, RUH, ATH.

[matkat]

United used to fly Brussels LHR with a B727 as a feeder for the trans atlantics and I think from other European points , around 12 years ago . Delta also did the same I seem to remember .
Yes that is right they (Delta) operated at least one feeder flight I know about which was Prague to Frankfurt?Amsterdam circa 1995.

[flyboyike]

If there is indeed any money to be made from the US domestic lo-co market, surely it doesn't belong in Sir Richard's pocket.



Nor is it likely to fit therein, can't be much room left in them pockets.

[Lucifer]

Sounds like they are looking for cabotage rights. They are very unlikely to get them. I'm not aware of any countries that will allow a foreign carrier to run domestic flights. OK it could be said that's exactly what Ryanair do in the UK but it's not quite the same.
The denial is perfectly legal. There is no compulsion for a country to allow anyone these rights.
Sorry, but there are a few over-simplifications, such as the above.

Virgin America is designed as a 25% ownership by Branson's Virgin group - exactly the same as Virgin Blue in Australia is limited to minority foreign stakes only. What is at question in the application is whether he is in fact excercising control (i.e. effectively >50% ownership) through the financial structure - cabotage is irrelevant.

Take care to compare to Europe, as each EU state is currently classed as a separate country, and additionally, during the Cold War, intra-German and Europe flight by US airlines were part of a completely different network, which was designed for political reasons (military support and non-commercial connections).

Furthermore, intra-EU being free is NOT the same as US airlines operating within the EU from one country to another, as these are separate states from the perspective on the US airline, for which cabotage is currently irrelevant, based upon the treaty structure in place at the current time.

[sinala1]

exactly the same as Virgin Blue in Australia.
I am open to correction here, but I thought VB was 100% foreign owned (intial $10million investment provided by Virgin Group for launch etc) until 50% was sold to the Patrick Corporation in 2002 for approx $250million?

[Lucifer]

I am open to correction here, but I thought VB was 100% foreign owned (intial $10million investment provided by Virgin Group for launch etc) until 50% was sold to the Patrick Corporation in 2002 for approx $250million?
Actually, I think you are correct, but complicated perhaps by it being new, and run by an Australian CEO - not sure exactly why it was allowed, while Qantas cannot be owned by Texas Pacific outright?

[PAXboy]

jimworcsWhat is so special about airlines that they need such protection?Ahh, what indeed?
It used to be the shipping lines that were seen as part of a country's international prestige. Ships were 'flying the flag'. Then shipping was overtaken for speed and glamour by the airlines in the 1950s and 60s. The shipping lines faded as the ever larger aircraft took, first, their passengers and then their freight. They had to 'flag out' to save money and then reinvented themselves for cruising whilst the container ships completed the take over of the freight market.

Airlines still have the glamour for the politicians and press hence the public thinking so as well. We regularly hear the Brits refer to the 'flag carrying British Airways' which is technically incorrect as the airline is no longer nationalised, but having a Union flag painted on the a/c is still seen as a vital bit of marketing.

In all of this, the Americans are still behind Europe on the place of airlines in the national psyche and that is a big part of this. Further compounded by the events in the Middle East and the USA feeling vulnerable on all fronts.

BUT ... this is just a simple exercise to maintain jobs for their own companies who pay the wages of the American govt and it's agencies and that is perfectly clear and understood. It would appear that the new airline has not correctly met the current regulations. They might have chosen this route to see what they could get away with but there will be no doubt that they will have a plan 'B' and 'C' to put in a different structure. That will happen pretty fast and the airline will operate a bit later than planned.

[sinala1]

while Qantas cannot be owned by Texas Pacific outright?
I am not 100% up to speed on that, but I believe it possibly has something to do with the Qantas Sale Act 1992 (http://www.comlaw.gov.au/ComLaw/Legislation/ActCompilation1.nsf/framelodgmentattachments/BD462CE9CC8D5116CA256F71004E567A)? (which, right now, I cannot be arsed reading :) )

[PantLoad]

My opinion, and only that...

It used to be, maybe still is, that the U.S. considered the U.S. airline industry a "Strategic Industry"...meaning that, in time of war, the assets, personnel, etc., would be used for/by the military. With that in mind, they (Congress) has always been reluctant to allow really any kind of foreign ownership/control of a U.S. carrier. I don't think it's so much a marketing (protectionist) thing...again, only my opinion (an uneducated opinion, I fully admit).

Further, in my humble opinion, I think it's a shame to perpetuate this doctrine. At this point, we're a global economy, and most of the stuff made in the world is made world-wide. So, Boeing aircraft are no longer made just in Seattle, but parts for each and every Boeing are made in dozens of countries throughout the world. There is no control there for the U.S. government to ensure a steady, uninterrupted supply of parts for aircraft. (Many of Boeing parts are made in China, for example!!!)

Most of the Toyotas sold in America are made in America, while many parts for GM's Chevrolet are made outside the U.S. So, if we Americans want to maintain the protectionist stance, it's way too late!!!!!

Again, in my humble, uneducated opinion, I really don't see how Virgin America will cause any problems for the airline industry in America...problems that haven't already been caused by deregulation. (I don't want to open a can of worms with this issue.)

As it's supposed to be, the key to success in business is to be able to supply a product or service that is wanted/needed by the customer, at a price the customer is willing to pay, and at a cost structure that enables a profit. No question, deregulation has defined this for the U.S. airline industry.

PantLoad

[Golf Charlie Charlie]

No-one (I think) has yet mentioned the Civil Reserve Air Fleet, which I think is a further factor in this whole equation for the Americans, who want to have ownership over their airline fleets for reasons of national security. I think the Fleet has been invoked 2-3 times in its existence.

[toledoashley]

Why does RB not lease the brand name to the investors - get a rebate ala easyJet.

[MarkD]

GCC - don't think CRAF is mandatory
http://www.af.mil/factsheets/factsheet.asp?id=173

Looks to me like they get incentives to join but are not obliged to.

[NZLeardriver]

Northwest operates a lot of Asian flights that do not originate or end in the US.
UPS and I think Fedex both have Asian bases that only fly in Asia, and only hire american pilots.

[alangirvan]

If Virgin is not in control of the American entity, then it is lending its name to an airline, which it hopes will be good for the brand. If the airline makes huge losses or gains a reputation for rude in flight service, Virgin will have no control over improving things.

So, will Richard Branson bungy jump off the Golden Gate Bridge 0n launch day - he will play his part in making sure that everyone is aware of the new brand. But he has sold a franchise to local investors, and he hopes they will manage it nicely for him.

[FlyingA320]

http://dms.dot.gov/search/document.cfm?documentid=435199&docketid=23307

Motion of Virgin America, Inc. requesting an extension of time of three business days, until January 16, 2007, to file its Objections and response to the Department's Show Cause Order rendered on December 27, 2006 in the above-captioned matter.

[Lucifer]

U-turn on Virgin boosts ‘open skies’ hopes
By Doug Cameron in Chicago and Kevin Done in London

Published: March 20 2007 19:57 | Last updated: March 20 2007 23:30

US authorities on Tuesday reversed their opposition to plans by Sir Richard Branson’s Virgin Group to launch a domestic US carrier in a move that could soothe lingering European opposition to a new transatlantic aviation treaty.

The UK entrepreneur’s long-running efforts to launch San Francisco-based Virgin America had been caught in the political crossfire of efforts to reach a EU-US agreement.


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EU transport ministers are due to vote on the “open skies” proposal on Thursday, amid signs the UK will not block an agreement, though there are concerns that political opposition could reignite in the US.

The tentative approval for Virgin America from the US department of transportation – which blocked the application last December – was viewed as an effort to calm fears in Europe that the pact was unbalanced.

The Virgin America application was unconnected to the open-skies proposal, which would deregulate route access and promote co-operation in safety and security matters. However, the DoT decision is viewed as an attempt by the US to signal that it will address continuing European concerns about the airline investment climate in negotiating a second-stage agreement.

Tony Blair, the UK prime minister, on Tuesday lobbied US president George W. Bush to persuade Washington to commit to greater liberalisation at a later date.

Government insiders made it clear that the UK, while seeking concessions before the vote, would not try to block the pact.

Virgin America was on Tuesday night examining the US decision, with final approval requiring the airline to replace its US-born chief executive because of his close ties to Sir Richard.

Additional reporting by Chris Adams in London and Andrew Bounds in Brussels

[DONTTELLTHEPAX]

Virgin America planning low-cost transatlantic flights

16.04.07
Virgin America, the new budget airline part owned by Sir Richard Branson, is planning to operate low cost transatlantic flights, the Daily Mail reports. It could see the airline take on Ryanair in a cut-price air war on the lucrative transatlantic routes.

Full story here- http://www.uk-airport-news.info/heathrow-airport-news-160407a.htm

The newspaper also speculates that other US no-frills airlines - including Southwest and JetBlue - are planning to join in the transatlantic scramble.

[BRUpax]

It's the end of aviation as we know it Captain :{

[spanishflea]

Sitting in Union Square this lunchtime it was quite interesting to watch one of the Virgin America A320s buzzing San Francisco for half an hour or so, being followed by what looked to be the same chaseplane that Boeing usually use for their publicity shots!

I assume we can expect a huge blaze of publicity from the airline in the next few weeks and days...

[concorde001]

Virgin Nigeria losses hit Virgin Atlantic

Retained Profits down by 90%, from £60.3m to £6.6m in the financial year to the end of February
Excluding Virgin Nigeria, operating profit fell from £65.5m to £43.3m.
Including Virgin Nigeria the group's operating profit fell from £32.6m to £3.5m.
Group turnover rose by 16 per cent from £1.9bn to £2.2bn,
Passenger numbers increased from 4.8m to 5.3m


Virgin Atlantic, the long-haul airline group controlled by Sir Richard Branson, suffered a steep fall in profits last year including growing losses at its Virgin Nigeria affiliate.

Singapore Airlines, which owns a 49 per cent stake in Virgin Atlantic Ltd, the group which includes Virgin Atlantic Airways, Virgin Holidays and a 49 per cent stake in Virgin Nigeria Airways, is reviewing the future status of its holding in view of Virgin Atlantic's weak financial performance.

According to the report and accounts filed by Virgin Atlantic Ltd, the group's retained profit plunged from £60.3m to £6.6m in the financial year to the end of February.

Sir Richard, president of the airline group, said that it had been hit by added cost pressures including the increased price of fuel, the impact of the security alerts at London Heathrow airport, its main operating base, in August last year, and administration costs arising from the UK government decision to double air passenger duty from February this year.

The group is also being hit by big losses at Virgin Nigeria, which started flying two years ago and which is facing heavy costs to start up new routes.
During the year, Virgin Nigeria started flying new routes to Calabar and Sokoto in Nigeria, Dakar in Senegal, and Dubai, but was forced to close the Dubai route because of "adverse market conditions".

According to the Virgin Atlantic Ltd accounts, Virgin Nigeria made an operating loss of £39.8m, up from a loss of £32.9m a year earlier.
Excluding the Nigerian carrier, the group's operating profit fell from £65.5m to £43.3m. Including Virgin Nigeria the group's operating profit fell from £32.6m to £3.5m.

Group turnover rose by 16 per cent from £1.9bn to £2.2bn, while Virgin Atlantic passenger numbers increased from 4.8m to 5.3m.

Full Article: Financial Times (http://www.ft.com/cms/s/5acbd646-49c7-11dc-9ffe-0000779fd2ac.html)

Hopefully Virgin Nigeria will start making a profit soon, otherwise VS will continue to take a hit. Though it is interesting to note that even after excluding VK, VS' operating profit was down by £22m. When Open Skies is introduced in 7 months, how will VS fare?

[brabazon]

I guess when Open Skies kicks in then VS will face a fare war and they really need a war chest to weather the storm, but they will also need to cut costs to compete effectively. Tough times ahead on the Atlantic.

[BlueTui]

More spin from the Virgin group of companies, undoubtedly this will help its case in its current pay negotiations with its infamously underpaid cabin crew, just read his (SRB's) autobiography where he pleaded poverty with his record/shop staff all those times to avoid paying them their fair wage. while he went onto become one of the country's richest man:mad:

This comming from a long term admirer of sir richard.... and no i do not work for any Virgin company.

[alexb757]

Ignition,

Are you sure you got your facts right? You are, presumably, taking about Ryanair, the Irish carrier and the largest European LCC and not Ryan Air (as in Ryan International Airlines)?? Two entirely different companies.

The one you mention sounds very much like Ryan International and NOT Mike O'Leary's mob which is strictly a European LCC. The only commonality is that Ryan is an Irish name and................lots of people get confused between the two.

VB

(P.S. I used to fly for FR in the 90s when they were doing their big EU expansion, and I also happen to live in the US where I am familiar with most airline companies)