Losing Virgin America

Richard Branson’s fledgling airline, Virgin America, won’t be flying across the U.S. for at least a little while longer now that the Department of Transportation has tentatively rejected the company’s request to begin service.

Virgin America CEO Fred Reid told the San Francisco Chronicle the denial of the application had been expected.

In its report, DOT said that "Virgin America would have to revise its ownership, corporate structure and associated agreements to be 75 percent owned and actually controlled by U.S. citizens before it can receive an operating certificate."

The airline has14 days to respond and intends to do so, according to the Chronicle.

Virgin America plans to provide low-rate flights between San Francisco International and New York City’s John F. Kennedy International, then expand. Virgin’s celebrity CEO Branson has been preparing for the launch for some time, choosing in 2004 to make the Bay Area its home base and applying for permission to fly in the U.S. last December.

Branson may have to sell off part of their investment to reduce the 25 percent cap – and the airline may even need to sell off the popular Virgin brand, airline industry analyst Henry Harteveldt told the paper. He said major U.S. airlines are fearful of Virgin America.

"People know that Richard Branson is an innovator. Innovation is not something that’s closely associated with U.S. legacy airlines, who have exhibited less creativity than a pile of mud," he said.

The airline has the support of the S.F. Mayor Gavin Newsom and Gov. Ahnold. It expects to create 3,000 jobs.