The Transportation Department made the right call when it decided to offer airline rights to Virgin America, but the government should not have insisted on the ouster of the carrier's CEO, Fred Reid.

True enough, Reid volunteered to step aside as a gesture of good faith to silence critics that he was some sort of stooge for Virgin Group's chairman, Richard Branson. He even signed an affidavit that his loyalty was not to Sir Richard, who first selected him, but to Virgin America's U.S. citizen-dominated board, which reappointed him.

That should have been enough.

Instead, the DOT made his departure a condition of its approval, even though there is no evidence that Reid, a former president of Delta, is anybody's puppet.

For decades, the Federal Aviation Act required, among other things, that the president of a U.S. airline be a U.S. citizen. A few years ago, Congress added the requirement that the airline also be under the "actual control" of U.S. citizens. This vague and meddling act has led, in the case of Virgin America, to a virtual witch hunt for any taint of foreign influence.

This is an ugly precedent. Now any officer of a start-up airline who is a U.S. citizen may have to prove a negative ("I'm not a foreign mole") in order to survive attacks by organized labor and network incumbents.

Fortunately, the European Union Council of Ministers last week approved a new aviation accord that will further open air travel between the U.S. and Europe. The agreement also calls for further talks to liberalize our antiquated rules on foreign investment and control.

That can't happen soon enough if it will put an end to this kind of regulatory nit-picking.

Small and large

Small ships and big airplanes are in the news -- and it's good news. A week ago in our news pages, we reported that there's still a viable market niche for "small" ships. Oceania and Silversea confirmed it, both ordering new vessels that, like the new ships ordered by Seabourn last year, are smaller than small cities.

Within days, the U.S. hosted demonstration flights of the next-generation flying behemoth, the Airbus A380.

These are welcome developments, for they prove what's good about this industry: its dynamism and its responsiveness to consumer demand and market forces.

Until a very short time ago, it was the consensus among cruise people that the economics of big-ship cruising were so good that it made no sense to invest in small ships for 1,000 or fewer passengers. They were right, at the time. But Seabourn proved them wrong last year, convincing its parent, Carnival Corp., to build two 450-passenger vessels. The tide was turning, and now there's even more new hardware in the pipeline for the upscale, small-ship segment.

In the air, which is even more fickle than the sea when it comes to travel, Airbus has created an airplane that has the potential to give passengers what they have always craved: more space. Although it's over budget and behind schedule, the A380 is here and it works. In time, it will become a familiar sight at the world's great hubs.

The big question is whether the economics of big airplanes will drive the airlines to pack it with seats and rob it of the airy feel that Airbus has proudly given it.

Nobody expects Silversea to squeeze 2,000 berths into the ship it just ordered, but, alas, we don't have that kind of faith in the airlines.

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