The U.S. Department of Transportation has ruled that Virgin America, the long-planned low-cost airline that shares the Virgin name with Richard Branson’s Virgin Atlantic, is ineligible to receive an operating certificate in the United States. The reason: The regulatory body considers the airline to be under foreign control, and American law does not permit more than 25% of the voting stock of any airline to be in the hands of non-U.S. citizens.
This is all just silly, and it strikes me as anti-consumer protectionism, pure and simple. The other airlines don’t want the competition, and the government is letting them get away with it. For example, Continental Airlines argues that the Virgin America CEO is effectively a foreigner, even though he’s American. Why? Because he was the British firm’s choice.
But in an age of global capitalism, aren’t these citizenship tests and percentage calculations increasingly meaningless? And why is 25% some magical threshold? I might even understand the argument that you would want to require a domestic majority for some national interests, but why is a 75% supermajority necessary?
The whole thing smacks of greed, wrapped in the flag. And with airlines trying to merge, with the publicly stated goal of decreasing competition and pushing up airfares, we need all the competition we can get. Regardless of nationality.
Related:
- Will foreign ownership of airlines mean lower prices?
- US-EU open skies treaty dead in the water, so to speak
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January 17th, 2007 at 11:29 am
[...] Virgin America, the airline whose operating certificate was denied by the U.S. government because it was deemed to be a foreign entity, and thus in violation of law mandating American ownership of domestic airlines, isn’t giving up. (Background here.) [...]
January 18th, 2007 at 8:34 am
[...] Late yesterday, the airline announced a corporate restructuring, which, in their claims, reduces the whiff of excessive foreign ownership, the factor which previously grounded the company. Britain’s Virgin Group will hold 2 seats on the board, or no more than 25% of the votes. The list of changes to the corporate structure is outlined in a press release. (Now, why didn’t they do this stuff earlier, when it was obvious their application was going to be shot down??) [...]
March 21st, 2007 at 9:20 am
[...] – Virgin America is un-American – Virgin America wants your vote, teases you with glimpses of their planes – Update: Virgin [...]
August 2nd, 2007 at 2:52 pm
Virgin America will knock the competition silly once they start flying and the word gets around. They have a knack of giving great service. They have much bigger seat’s in economy and give you a nice bit of food on the long haul flight’s. The airlines in the USA have long ago forgotten what customer service is about as it costs money to give it. Virgin America will bring customer service back.
John C. Gaughan
August 12th, 2010 at 9:43 pm
[...] Virgin America launched, its very existence was challenged by competitors and the US Dept. of Transportation, which initially ruled that the company didn’t meet the threshold of minimum US-ownership for [...]