Virgin America, the proposed LCC startup that is 25% owned by Virgin Group, is being held up by objections over its US citizenship from legacy carriers urging the US Dept. of Transportation to reject its application for an operating certificate. Virgin America said last week that it has been forced to secure an additional $53 million in temporary financing to fight what it calls "dilatory legal tactics" by Continental Airlines, Delta Air Lines, American Airlines and US Airways, who argue that the upstart is effectively controlled by Virgin Group and therefore violates US rules limiting foreign control of US airlines.

Virgin America responded with a DOT filing last week that reiterated it is 75% owned by US investors and managed by US citizens such as CEO Fred Reid, former president of Delta, who said he was confident the airline would meet with DOT approval. Continental pointed to the "shadow of foreign influence" in its DOT filing. Virgin said the objections are "not based on reality or fact, but are simply an attempt to preserve the status quo, delay competition, and inject irrelevant issues into the proceeding." The legal fight could delay Virgin America's launch for months as DOT considers the objections. It filed its initial application in December, 2005 and already has leased 34 A320s. It emphasized that stalled efforts to change US ownership and control rules (ATWOnline, Aug. 17) should not affect its application, which it says complies fully with existing US laws.