The Transportation Department has rejected an Alaska Airlines challenge to the U.S. citizenship status of privately held carrier Virgin America.
The agency said Friday that Virgin America remains a U.S. citizen and remains under the actual control of U.S. citizens.
Under U.S. law, foreign ownership in a U.S. air carrier is limited to 25 percent of the voting interest in the carrier.
The Virgin Group, controlled by British billionaire Richard Branson, is a minority holder in Virgin America.
DOT said the Virgin Group holds a 25 percent equity stake in Virgin America.
Virgin America, based in Burlingame, Calif., has agreed to ensure that it will get new investments of capital from entities other than the Virgin Group. It also will add another U.S. citizen to its board. That will result in seven U.S. citizens as voting members on the nine-member board.
Some analysts said Alaska Airlines and United Airlines would have stood to gain if Virgin America, which flies transcontinental routes, were to fold.
Alaska Airlines first filed a petition in February 2009 questioning Virgin America's citizenship status, following news reports that suggested Virgin America had tilted toward foreign ownership.
DOT said it conducted a thorough review, finding in favor of Virgin America, which had vigorously defended itself against the claims of Alaska Airlines, a subsidiary of Alaska Air Group Inc. based in Seattle. Virgin America has said Alaska Airlines' arguments relied "on inaccurate facts."
DOT originally certified Virgin America's citizenship status in August 2007, when the carrier launched service. The carrier later notified the government of a significant potential shift in its shareholder makeup.
Based on its findings announced Friday, DOT dismissed petitions by Alaska Airlines and the Aircraft Mechanics Fraternal Association for a public inquiry into Virgin America's citizenship.
Alaska Airlines spokeswoman Bobbie Egan said in an e-mail to The Associated Press that the carrier is "disappointed the Department of Transportation chose to conduct this review behind closed doors and without public review or comment by interested parties."
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