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Oberstar Questions Virgin America's Citizenship Status

A couple weeks ago, I talked in-depth about Virgin America's status as a US-owned carrier. At the time, I said, "There are probably bigger fish to fry right now than dealing with a relatively tiny upstart airline and its ownership. If it's in a gray area as it appears to be now, then the incentive to devote time to this is probably fairly low. . . ." I may have to take that back. Influential Rep James Oberstar (D-MN) has apparently decided to put the discussion on his radar.

If Rep Oberstar starts to go after you, there's a very good chance it's not going to slip through the cracks. As the chairman of the House Transportation Committee, Rep Oberstar is one of the more involved House members in the world of transportation. He has been involved in many different inquiries. Most recently, he has been pushing an expiration date for antitrust immunities, something that the airline industry opposes (and rightfully so, but that's a different story). The point is . . . when something catches Rep Oberstar's eye, it's going to get some attention.

Rep Oberstar sent a letter to Secretary of Transportation Ray LaHood asking that Virgin America's ownership be reviewed in light of the reported cashing out of the US-based investors. If Virgin Group has, in fact, bought back the financial interest but left the actual share ownership with the funds, that may very well not suffice.

If the equity funds have no further stake in the success of the company, there is serious question as to whether their continued title to the shares is sufficient grounds for them to be considered the owner of the stock, for the purpose of the statutory requirement that a U.S. carrier must have 75 percent of its voting stock owned or controlled by persons that are citizens of the United States.
Does this mean Virgin America will be shut down tomorrow? Of course not. The glacial pace of government means that after many, many hearings, something may be decided. But I wouldn't count on that happening any time soon. It is, however, just about a given that this will get addressed at some point..
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