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Thu, Feb 12, 2009

Alaska Airlines Wants DOT Probe Of Virgin America Ownership

Wants 'Assurance' Carrier Is Still US Majority-Owned

When small companies find themselves up against stiff competition, they often work harder and increase ad budgets. When big companies do battle, sometimes it's easier just to distract your competitor and cost him money by convincing government regulators he needs investigating.

Privately-held Virgin Airlines made an auspcious debut in 2007, and has been slowly gaining ground against its more established competitors. The airline's load factor was at 81.4 percent and rising in last year's third quarter, indicating its increasing popularity... though the airline also lost a rather humbling $175.4 million, with some routes costing twice or more what Virgin makes on fares and ancillary charges.

Now, the Associated Press reports Alaska Airlines -- which goes head-to-head with Virgin America in Seattle, San Francisco and Los Angeles -- recently asked the US Department of Transportation to reexamine whether the ownership structure of its new competitor meets legal requirements for 75 percent ownership by US stockholders.

Alaska says recent media reports bring the matter into question. Keith Loveless, general counsel for Alaska Airlines, says "Only through a careful and ongoing review of Virgin America's recent actions conducted on the public record can the DOT and public be assured that Virgin will remain a US citizen."

Virgin America was forced to make organizational changes, and even purge execs considered too close to Sir Richard Branson, before the DOT would issue its operating certificate. The company says nothing has changed since, and calls Alaska's petition, "meritless."

"Should our ownership structure change in the future, we will of course notify the DOT in advance, so they can confirm our continuing compliance."

FMI: www.alaskairlines.com, www.virginamerica.com

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