Virgin America Raises Another $30M in Capital

STARTUP AIRLINE Virgin America announced Wednesday that it has raised an additional $30 million in financing, strengthening its coffers as it waits for federal approval to begin service.

In a related show of support, the Burlingame-based airline's workers took to the streets of San Francisco on Wednesday, donning red Virgin America T-shirts on Valentine's Day in a marketing push for the carrier's launch.

"We're trying to show the town a little love, because we want to be the hometown airline here," said Fred Reid, Virgin America's chief executive officer. "The economic power a local airline can bring to a city or region can be in the billions (of dollars)."

Reid said the new influx of capital comes from the airline's majority U.S. investors.

The U.S. Department of Transportation tentatively rejected the airline's application to fly in December, concerned minority owner and British billionaire Richard Branson had too much control. Federal law prohibits foreigners from owning more than 25 percent of domestic airlines.

"We felt it was important to ensure that Virgin America has the best financial resources possible when it launches," said Robert Nisi, chief operating officer of Cyrus Capital, a partner and majority investor in Virgin America. Cyrus Capital and Black Canyon Capital put up $10 million in new investment and Cyrus added a$20 million loan to complete the new financing.

Wednesday was the final day for Virgin America's detractors to file objections to "sweeping changes" the airline made to its ownership structure last month following the government's tentative rejection.

Reid said the concessions prove the airline is owned by Americans. Virgin America also has offered to replace Reid as CEO if that would help get approval, in response to a Transportation Department belief that Reid would be beholden to Branson, who hired him.

Legacy airlines such as Continental, American and Delta have opposed Virgin America's launch.

The fledgling airline initially raised $177 million, but is "burning millions a month" during the launch delay, Reid said. Recently, legacy carriers' objections "have become even more shrill" in the latest round of objections, he added. They hope that additional waits will sour Virgin America's investors.

Investors have "shown lots of patience," Reid said. He expects a Transportation Department decision within 30 to 90 days.

"We are ready to fly and can't wait to bring competition, lower fares, jobs and economic benefits to the communities we will serve," Reid said.

The airline hopes to bring 1,600 jobs to the Bay Area. It will fly out of San Francisco International Airport and plans to launch domestic service to New York City this year, pending federal approval.

Within nine months of operation, the airline plans to expand service to Los Angeles and San Diego international airports, McCarran International Airport in Las Vegas, and Dulles International Airport in Washington, D.C..

The airline expects to serve up to 10 cities within its first year and up to 30 cities within five years, including possibly San Jose and Sacramento.