Sacred flying cows
THE NATION’S BAN on foreign ownership of U.S. airlines is fast becoming another political sacred cow. Twice during his presidency, George W. Bush has rightly proposed softening the ban in order to attract more overseas investors to the country’s financially shaky airlines, and to expand opportunities for American
carriers around the world. But both times Congress has loudly rebuffed the president. But protectionists need look no further than Virgin America -- a nascent airline -- as a case in point on why the ban needs to go.
When Virgin America applied in December to start service in the United States, there was little doubt that potential competitors would scrutinize the application of an airline with such a British pedigree. After all, the last thing perennially troubled carriers want is more competition from another low-cost airline.
But the expected nitpicking has turned into a bureaucratic pummeling, with the country’s older, so-called legacy carriers swarming in on Virgin America like a street gang, protecting their turf in the sky. Over the last eight months, Continental and other legacy airlines have buried Virgin America in red tape by filing a barrage of motions with the Department of Transportation that allege the carrier is insufficiently American. Indeed, Virgin America shares part of its name with British billionaire Richard Branson’s London-based Virgin Group, and Branson has long wanted to launch a carrier in the United States.
But Branson doesn’t have a controlling interest in Virgin America. After he started talking publicly in 1998 about launching Virgin America, Branson lobbied Congress to relax its antiquated 1938 law that caps overall foreign ownership of a U.S. airline at 25% of its voting stock. Congress hasn’t budged, so Branson, absurdly enough, couldn’t launch Virgin America with his own deep pockets. He instead licensed the Virgin name to American businessmen, who filed a detailed application with the Department of Transportation to launch the airline.
Virgin America seemed almost ready to fly: It had ordered a fleet of Airbus jets, selected San Francisco as its hub and installed a former chief of Delta Air Lines as its chief executive. But more than eight months later, Virgin America is still grounded, and Continental is still filing complaints trying to prove that Virgin is too foreign. An application process that normally takes a few months is heading into its ninth, and, if approved, Virgin America probably won’t be able to start flights this year as planned.
It’s astonishing that the government is wasting resources ascertaining the degree of foreign influence over this airline. Congress needs to come to its senses.
The United States is not some insecure Third World country that needs to view the rest of the world as a threat rather than an opportunity. Whether Virgin America succeeds should be up to consumers, not jealous competitors cynically waving the flag.