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BEFORE the DEPARTMENT of TRANSPORTATION WASHINGTON, D.C. Application of VIRGIN AMERICA INC. for a Certificate of Public Convenie

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BEFORE the DEPARTMENT of TRANSPORTATION WASHINGTON, D.C. Application of VIRGIN AMERICA INC. for a Certificate of Public Convenie BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Application of VIRGIN AMERICA INC. for a Certificate of Public Convenience and Necessity under 49 U.S.C. 9 41 102 to engage in interstate scheduled air transportation APPLICATION OF VIRGIN AMERICA INC. FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY Communications with respect to this document should be sent to: Frederick W. Reid William C. Evans Chief Executive Officer John R. Mietus, Jr. David H. Pflieger, Jr. DLA Piper Rudnick Gray Cary US LLP Acting General Counsel 1200 Nineteenth Street, NW Virgin America Inc. Washington, DC 20036 533 Airport Blvd., Suite 400 (202) 861-6466 Burlingame, CA 9401 0 (202) 689-8572 fax [email protected] Counsel for VIRGIN AMERICA INC December 8.2005 NOTICE: Any person who wishes to support or oppose this application must file an Answer by December 29, 2005 and serve a copy of that Answer on the persons named above and on all persons served with this Application. BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) Application of ) 1 VIRGIN AMERICA INC. 1 ) for a Certificate of Public Convenience ) DOCKET OST-2005- and Necessity under 49 U.S.C. 9 41 102 to ) December 8,2005 engage in interstate scheduled air ) transportation ) APPLICATION OF VIRGIN AMERICA INC. FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY Virgin America Inc. ("Virgin America") respectfully submits this Application for a Certificate of Public Convenience and Necessity authorizing it to engage in scheduled interstate air transportation ofpersons, property, and mail pursuant to 49 U.S.C. 4 41 102. Virgin America requests that the Department process this Application using simplified procedures and written submissions pursuant to Subpart B of the Department's Procedural Regulations, 14 C.F.R. Part 302, so that it niay commence service as early as possible in 2006. This application will show that Virgin America is a United States citizen that has sound financial backing, an experienced and capable management team, and a solid service proposal. These attributes will allow the airline not only to succeed, but to prosper, in today's competitive, domestic airline industry. With its sound business model and innovative product and service offering, Virgin America intends to contribute to the further evolution of the U.S. airline industry, an evolution first identified by the Department of Transportation in the 1996 study entitled "The Low Cost Service Virgin America Certificate Application Revolution." More significantly, Virgin America intends to offer high-quality, value- priced service that will benefit the traveling public and contribute to the American economy by supporting the key domestic policy goals of increased airline competition and job creation. Accordingly, once Virgin America IS found qualified to begin scheduled passenger service, it respectfully requests that the Department grant its application for a certificate so that it may commence service as expeditiously as possible. I. VIRGIN AMERICA IS A U.S. CITIZEN THAT IS FIT, WILLING, AND ABLE TO PROVIDE DOMESTIC AIR SERVICE The information provided in this application demonstrates that Virgin America fully meets the requirements of 49 U.S.C. 5 4 1 102 and should be issued the certificate it requests. The airline's ownership and management comply with the U.S. citizenship and control requirenients of 49 U.S.C. 4 40102(a)( 15).' In addition, the airline's service proposal, the experience, competence, and positive compliance disposition of its key personnel, and its strong financial backing all show that the carrier is fit, willing, and able to commence and maintain domestic air transportation. A. Virgin America is Fit, Willing, and Able Virgin America is financially fit, with sound financing and a strong business model complementcd by the marketing power of the world-renowned Virgin brand. The company will be fully-funded with private equity and subordinated debt totaling $1 77.3 million before operations begin. This capitalization, unprecedented for a U.S. new -I / Exhibits to this application consolidate the detailed information required by 14 C.F.R. Parts 201 and 204 and supplement this opening statement; Exhibit 2 tracks the specific requirements of 14 C.F.R. 4 204.3. -2- Virgin America Certi licate Application entrant airline, exceeds the Department's financial test for new entrants, a test based on pre-operating expenses and one-quarter of first-year expected operating expenses. Once opcrational, Virgin America will rely on new aircraft, leading-edge technology and business processes, and high-quality employees to achieve operating costs comparable to many of the other low-cost carriers currently flying. This business model will also ensure Virgin America will operate safely. securely, and reliably with an unwavering commitment to guest service and reasonable, simplified fixes that will stimulate conipetition and benefit the American public and the American economy as a whole. Virgin America's experienced management team is well-equipped to manage the new airlinc successfully and in full compliance with current law and regulations. Mark Lanigan of Black Canyon Capital LLC is the Chairman of the Board, and he and Nicholas Singer of Cyrus Capital Partners, LP represent the controlling U.S. investors; both are prominent and successful private investors. Fred Reid, the carrier's Chief Executive Officer, has more than 25 years of experience in airline management, niost recently serving as President and Chief Operating Officer of Delta Air Lines, where he led 65,000 employees and oversaw over 2,400 daily domestic flights by 55 1 large passenger jet aircraft. Mr. Reid is complemented by a senior management team with strong, airline-related experience and business acumen that will help guide Virgin America to success. Detailed information on the team is included in Exhibits 2 and 7. One other element -- a world-renowned brand -- completes Virgin America's initial resources. The new airline has licensed the Virgin brand and will incorporate Virgin service-enhancing innovations in many areas, building on the brand and adding to its well-recognized attributes of quality, service, value, and innovation. Virgin America -3- Virgin America C‘crti ficate Application also intends to adopt the kind of employee-centered and guest-fi-iendly business principles that have led to the success of other Virgin-branded companies and other world-class sen ice businesses in the United Statcs. B. Virgin America is a U.S. Citizen Virgin Anierica will be controllcd by its principal investor, VAI Partners LLC (“VAI”), a U.S. investment company co-managed by Mark Lanigaii of Black Canyon Capital LLC (“Black Canyon”) of Los Angeles and Nicholas Singer of Neu York’s Cyrus Capital Partners, LP (“Cyrus”). Both of these gentlemen are U.S. citizens and prominent and successful private investors. Mr. Lanigan is a founder and Managing Director of Black Canyon, and his firm will control private investment in Virgin America totaling slightly more than $44 million. Mr. Singer is a founding partner of Cyrus, which will also control private investment in Virgin Anierica of slightly more than $44 million. In all, VAI Partners LLC will contribute a total of $88.9 million of the $1 77.3 million in start-up funding for Virgin America. VAI Partners LLC holds and controls 75% of the capital stock and voting interest in the airline, and it has designated two-thirds of the voting members of the Virgin America Board of Directors (under the bylaws, the CEO is appointed to the board as a non-voting member). Various companies from the Virgin group of companies are providing the remaining fbndiiig for Virgin America, and one is licensing the Virgin brand to the new domestic airline. The remaining 25% of the voting and total equity interest in Virgin America is held by a Virgin group conipany and two British citizens, and they have designated the final one-third of the Board’s voting members (again, excluding the non- -4- Vi rg i 11 America Certificate Application voting CEO). When funding is complete, these non-U.S. citizens will have contributed a total of $29.8 million in equity and $58.6 niillion in subordinated debt to the new airline. The tenns of this iin,estment and corporate structure, as well as the coinposition of the airline's Board of Directors and management team, will ensure actual and potential control of the airline always remains in the hands of IJ.S. citizens -- a fact consistent with longstanding U.S. law and Department ownership and control principles. Also of note in this regard is the fact that VAI Partners LLC scrutini~edthe qualifications and employment of everyone on the Virgin America management team prior to assuming control of the company. Following this due diligeiice, the U.S. shareholders affirmed the employment of the current staff, and the Board of Directors passed a resolution appointing the company's officers to their current positions. Finally, while the Department recently issued a Notice of Proposed Rulemaking on Actual Control of U.S. Air Carriers, this application is not based on any new principles found in that proposal. Virgin America's desire to operate within the U.S. is fLilly consistent with existing laws and regulations. 11. VlRGlN AMERICA WILL OFFER HIGH-QUALITY, LOW-COST SERVICE The Department long has recognized the competitive benefits that new airlines bring to the marketplace and to U.S. consumers. Supported by a low-cost operating model and a unique, value-oriented service proposition, Virgin America will provide high-quality jet service to major U.S. markets coast-to-coast. Virgin America believes its service offering will further the goals of U.S. aviation policy, advance the interests of -5- Virgin America Certificate Application consumers in major metropolitan markets, and contribute significantly to the U.S.
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