Virgin America meets standards for U.S. citizenship, and is therefore operating legally as a U.S. airline, the U.S. Department of Transportation said on Friday.
The DOT's judgment refutes Alaska Airlines' challenge that Virgin America doesn't adhere to U.S. citizenship rules for airlines.
To meet the necessary standards, at least 75% of a carrier’s voting stock must be owned or controlled by U.S. citizens; the airline's president and at least two-thirds of the board of directors and managing officers must be U.S. citizens; and the carrier must be under the actual control of U.S. citizens.
The Virgin Group, controlled by British billionaire Richard Branson, holds a 25% equity stake in Virgin America.
VAI Partners is the 75% U.S. shareholder. However, under new conditions, U.S. investors cannot exercise their options and possibly decrease ownership.
Under the new plan, the DOT said, VAI retains 75% of Virgin America, with new U.S. investors in the partnership buying 100% of VAI shares at a price set through bids worked out through an investment bank.
The airline partnership alignment ensures that 75% of the voting stock of Virgin America will be owned by U.S. citizens.
The VAI investors also gave up their options and guarantees and agreed to fund their share acquisitions from personal assets, with the exception of one investor, which is getting a loan to pay for its shares.
Virgin America agreed to add another director, airline CEO David Cush, who also is a new investor. Now the board voting ratio of U.S. to non-U.S. members is 7-2.
The owners also will provide at least $68.4 million in new debt financing.
In addition, Virgin America removed some corporate governance provisions that favored the Virgin Group.