New U.S. Investers for Virgin America

Virgin America Inc., the low-fare airline backed by U.K. billionaire Richard Branson, expects an ownership shift of more than 10 percent under its plan to add new U.S. investors, Chief Executive Officer David Cush said.

A change of that size requires completion of the review under way by the U.S. Transportation Department, Cush said in an interview yesterday as Virgin America began service to Fort Lauderdale, Florida. He wouldn’t detail the new lineup beyond saying that existing investors are “staying on.”

“I’m sticking with what I’ve said, that we’ll have these new investors by the end of the year,” Cush said.

Broader U.S. ownership may deflect claims by Alaska Air Group Inc. that Virgin America is violating laws capping foreign ownership of airlines at 25 percent. Virgin America has said its ownership structure hasn’t changed since it began flying in August 2007.

Branson’s Virgin Group Ltd. supplied 25 percent of the initial $177 million in startup funds for Burlingame, California-based Virgin America, along with a $53 million loan. The rest of the airline is owned by management, Black Canyon Capital in Los Angeles and New York-based Cyrus Capital Partners, Virgin America has said. It hasn’t given a breakdown.

Cush, 49, said Virgin America probably will add service to two new cities in 2010, including five or six flights a day to Chicago by May as gates become available, he said. The other city may come in the second half and be “somewhere where you can’t see the ocean” in the middle of the country, he said.

Under study are flights beyond the U.S. by 2011, likely to Toronto, Vancouver or Mexico, Cush said.

Branson’s Broadside

Branson joined Cush yesterday in Fort Lauderdale, where he renewed his criticism of American Airlines’ proposal for an antitrust agreement with British Airways Plc. Such an arrangement would be “two-faced” after AMR Corp.’s American objected to similar plans by other airlines, Branson said.

Regulators’ approval of a trans-Atlantic alliance for American and British Airways would be “madness,” said Branson, 59.

Branson’s Virgin Atlantic Airways Ltd., which competes with American and British Airways, said last week that American CEO Gerard Arpey should be investigated by U.S. regulators after being “hypocritical” in his recent comments about aviation market dominance.

Virgin Atlantic has been lashing out at Arpey’s assertion that Delta Air Lines Inc. would find it difficult to win antitrust immunity for an alliance with Japan Airlines Corp., the Tokyo-based carrier that’s now in a marketing group with American.

(Mary Jane Credeur - Bloomberg.com)