BEFORE THE

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

________________________________________________

)

Application of )

)

VIRGIN AMERICA INC. ) Docket No. OST-2010-____

) 

for an exemption under 49 U.S.C. §40109 to provide )

foreign scheduled air transportation of persons, property )

and mail between the United States and Mexico )

(San Francisco – San Jose del Cabo). )

________________________________________________)

APPLICATION OF VIRGIN AMERICA INC.

FOR AN EXEMPTION AND DESIGNATION

TO PROVIDE FOREIGN SCHEDULED AIR TRANSPORTATION

Communications with respect to this document should be sent to:

Barbara Russell

 Associate General Counsel

Virgin America Inc.

555 Airport Blvd., Second Floor

Burlingame, CA 94010

(650) 762-7394 (phone)

(650) 762-7004 (fax)

barbara.russell@virginamerica.com 

June 29, 2010

Notice: Any person who wishes to support or oppose this Application may do so by: (1) filing 

an answer by July 14, 2010; and (2) serving that answer on the person(s) listed above and all 

persons served with a copy of this Application.
1

BEFORE THE

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

________________________________________________

)

Application of )

)

VIRGIN AMERICA INC. ) Docket No. OST-2010-____

) 

for an exemption under 49 U.S.C. §40109 to provide )

foreign scheduled air transportation of persons, property )

and mail between the United States and Mexico )

(San Francisco – San Jose del Cabo). )

________________________________________________)

APPLICATION OF VIRGIN AMERICA INC.

FOR AN EXEMPTION AND DESIGNATION

TO PROVIDE FOREIGN SCHEDULED AIR TRANSPORTATION

Pursuant to 49 U.S.C. § 40109 and Subpart C of the Department's Rules of Practice,1

Virgin America Inc. (“Virgin America”) hereby applies for an exemption from 49 U.S.C. §

41101 and designation under the U.S.-Mexico Transport Agreement,

2

In support of its application, Virgin America states as follows:

authorizing Virgin 

America to operate scheduled combination service in foreign air transportation of persons, 

property, and mail between San Francisco, California and San Jose del Cabo (“SFO-SJD”), as 

more fully described below. Virgin America respectfully requests this authority be effective 

immediately and is ready, willing, and able to commence service.

1. Virgin America is a Delaware corporation with its principal place of business at 

555 Airport Blvd., Burlingame, CA 94010.

 1 14 C.F.R. Part 302.

2 AIR TRANSPORT SERVICES AGREEMENT, WITH SCHEDULE, BETWEEN THE UNITED STATES AND MEXICO (Aug. 15, 

1960), as amended and extended.
2

2. Virgin America is a citizen of the United States, as defined in 49 U.S.C. §

40102(a)(15) and has been found fit to provide scheduled interstate air transportation of persons, 

property and mail. See Orders 2007-5-11 and 2007-8-17; and Letter from Susan L. Kurland, 

DOT Assistant Secretary for Aviation and International Affairs, to Virgin America Inc. in 

Docket OST-2005-23307 (determining that Virgin America remains a citizen of the United 

States) (Jan. 8, 2010). Virgin America is also authorized to provide scheduled foreign air 

transportation between the United States and Canada. See

3. Virgin America currently provides daily scheduled interstate air transportation 

between: (i) San Francisco and the following cities: Boston, New York, Washington, D.C.

(Dulles), Ft. Lauderdale, Seattle, Los Angeles, San Diego and Las Vegas; and (ii) Los Angeles 

and the following cities: Boston, New York, Washington, D.C. (Dulles), Ft. Lauderdale and 

Seattle. Virgin America also currently provides scheduled foreign air transportation between 

San Francisco and Los Angeles, on the one hand, and Toronto, Canada, on the other hand.

Notice of Action Taken (“NOAT”) in 

Docket OST-2010-0068 (Apr. 2, 2010).

4. Virgin America will initially provide service on the SFO—SJD route with five (5)

roundtrip flights per week, utilizing modern, fuel efficient Airbus A320 aircraft with 119 seats in 

a two cabin configuration (8F and 111Y passengers).

5. Virgin America is fit to conduct this proposed foreign air transportation. As the 

Department found, in granting Virgin America authority to serve the airline’s first foreign 

market, Toronto, Canada:

By Orders 2007-5-11 and 2007-8-17, we found Virgin America fit, willing, and able to 

conduct interstate scheduled air transportation of persons, property, and mail. The

foreign air transportation services authorized here are not markedly different in terms of 

aircraft size or stage length from the carrier’s current operations under its existing 

authority. We, therefore, find that Virgin America is qualified to provide the proposed 

air transportation for the period covered by the exemption.
3

NOAT in Docket OST-2005-23307, supra.

6. Two U.S. air carriers, Alaska Airlines and United Air Lines, are designated to 

provide, and do operate, direct-carrier (own aircraft) scheduled combination service on the SFOSJD route. Up to three U.S. air carriers may be designated to provide direct-carrier (own 

aircraft) service on the SFO-SJD route under the 2005 U.S.-Mexico Agreement. Virgin America 

therefore requests that it be designated and awarded exemption authority to provide the requested 

service on the SFO-SJD route.

7. Grant of Virgin America’s application is consistent with the U.S.-Mexico 

Transport Agreement as well as the Department’s statutory mandate to provide maximum 

reliance on competitive market forces, encourage entry into new markets, and promote low fare 

options for the traveling and shipping public, under 49 U.S.C. § 40101. Additionally, grant of 

the requested authority to Virgin America is consistent with the Department’s stated policy in 

previous route proceedings under the U.S.-Mexico Agreement of fostering new-entrant 

competition. As the Department stated in 2006 when it awarded Frontier Airlines LAX-SJD 

exemption authority, over the objections of Delta Air Lines:

Frontier’s new-entrant service in the Los Angeles-Mexico and the West Coast-Mexico 

markets will provide for important new U.S. carrier service in those markets, and bring 

new competition not only to the U.S. carriers currently serving the subject markets 

(including Delta, itself), but also to the foreign carriers serving the markets – benefits that 

would not be available if we were to select Delta in this case.

* * *

Thus, in selecting a U.S. carrier to serve these important limited designation points, we 

have, as a matter of policy, considered the enhancement of U.S. carrier competition to be 

a strong carrier selection criterion. . . . We have previously stated that “the addition of a 

new competitor in a market or geographical area which is subject to substantial 

concentration of service by a limited number of carriers, can significantly increase the 

competitive benefits to the traveling and shipping public.”

Order 2006-9-8 at 17-18.
4

Moreover, as the Department also stated when selecting JetBlue over Delta for an award 

of New York–Cancun service in 2006:

[T]he Department has consistently found that new entry is a significant carrier selection 

factor because it provides consumers with new service options and incumbents with new 

incentives to provide consumers with service that meets their needs. . . . [W]e look to see 

which applicant will most likely enhance competition, either in the primary route market 

or in a broader market. As Delta already serves the U.S.-Mexico market, and, more 

specifically, the New York-Mexico market and the U.S.-Cancun market, while JetBlue 

now serves none of these markets, we find on balance that a selection of JetBlue in this 

case would better advance competition than would a selection of Delta.

Order 2006-9-8 at 11-12.

Furthermore, as the Department noted when awarding Los Angeles-San Jose del Cabo 

authority to American over United in 2000:

[S]election of American would help ensure that the limited competitive opportunities 

under the U.S.-Mexico aviation agreement are fully used, providing the broadest range of 

carrier services and choice in the Los Angeles-San Jose del Cabo market, benefits not 

available under United’s proposal.

Order 2000-11-23 at 6.

8. Virgin America’s proposed service will also offer increased benefits in the SFO 

market, the airline’s home base, in particular, where Virgin America currently offers more than 

30 flights each day to nine (9) domestic and international destinations, and where Virgin 

America continues to expand with plans to grow its fleet to 44 aircraft by next year.

9. Virgin America’s proposed SFO – SJD service will add 61,880 annual seats to the 

market, and is projected to grow demand for travel between San Francisco and San Jose del 

Cabo by as much as 12%, or an increase of nearly 20,000 local passengers annually (about 27

passengers per day each way).
5

10. Virgin America’s entry into new markets has had a demonstrable impact on 

average fares. By way of example, Virgin America’s entry into the following markets resulted in 

significant reductions in the average fares in those markets:3

Market Average Fare Reduction Period

LAX-JFK -31 percent 2Q 09 v. 2007

SFO-JFK -31 percent 2Q 09 v. 2007

LAX-IAD -23 percent 2Q 09 v. 2007

SFO-IAD -32 percent 2Q 09 v. 2007

LAX-BOS -29 percent 4Q 09 v. 4Q 08

SFO-BOS -23 percent 4Q 09 v. 4Q 08

11. Virgin America hereby incorporates by reference all data previously filed with the 

Department to establish Virgin America’s fitness, and respectfully requests the Department take 

notice of such data, including particularly data filed in Docket Nos. 2005-23307 and 2010-0068, 

pursuant to Rule 24 of the Department’s Rules of Practice when evaluating Virgin America’s 

fitness to operate the proposed service.

12. Virgin America requests authority to combine the exemption sought herein with 

all of Virgin America’s existing economic authority, consistent with all applicable international 

air transport agreements.

13. Virgin America accepts and will comply with the Department’s standard terms 

and conditions imposed on exemption authority for scheduled foreign air transportation.

14. Virgin America’s application for an exemption poses no environmental or energy 

issues. Approval of this application will not result in a near-term increase in fuel consumption of 

10 million gallons or more. Virgin America will operate these routes with Stage 3 compliant 

aircraft that are configured to carry 119 passengers.

 3 U.S. DOT Origin & Destination Survey, via APGDat www.apgdat.com.
6

15. The addition of Virgin America’s well-known and well-received, high quality 

operations to and from Mexico will provide additional competition, market development and 

high quality service to the traveling and shipping public in the U.S.-Mexico market.
7

WHEREFORE, for the foregoing reasons, Virgin America Inc. respectfully 

requests that the Department grant it an exemption from 49 U.S.C. § 41101, a designation, and 

such other additional relief as may be necessary in order to permit Virgin America Inc. to 

provide scheduled foreign air transportation of persons, property and mail between San 

Francisco, California, and San Jose del Cabo, Mexico.

Respectfully submitted,

Barbara Russell

 Associate General Counsel

Virgin America Inc.

555 Airport Blvd., Second Floor

Burlingame, CA 94010

(650) 762-7394 (phone)

(650) 762-7004 (fax)

barbara.russell@virginamerica.com 

June 29, 2010
CERTIFICATE OF SERVICE

I hereby certify that a copy of the foregoing Application of Virgin America Inc. for an 

exemption was served this 29th day of June, 2010, via email transmission or first class mail, 

postage prepaid, on the following persons:

Jeffrey Manley

Senior Advisor – Regulatory Affairs

United Air Lines, Inc.

1025 Connecticut Avenue, N.W.

Suite 1210

Washington, D.C. 20036

jeffrey.manley@united.com

David Heffernan

Counsel for United Air Lines, Inc.

Wilmer Cutler Pickering Hale and Dorr LLP

1875 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

david.heffernan@wilmerhale.com

Marshall S. Sinick

Counsel for Alaska Airlines, Inc.

Squire, Sanders & Dempsey, LLP

1201 Pennsylvania Avenue, N.W.

Suite 500

Washington, D.C. 20004 

msinick@ssd.com

Carl B. Nelson, Jr.

Associate General Counsel

American Airlines, Inc.

1101 Seventeenth Street, N.W.

Suite 600

Washington, D.C. 20036

carl.nelson@aa.com

Howard Kass

Vice President, Legal

US Airways, Inc.

1401 H Street, N.W., Suite 1075

Washington, D.C. 20005

howard.kass@usairways.com

Robert E. Cohn

Counsel for Frontier Airlines, Inc.

Hogan Lovells US LLP

Columbia Square

555 Thirteenth Street, N.W.

Washington, D.C. 20004

robert.cohn@hoganlovells.com

Alexander Van der Bellen

Sametta C. Barnett

Jeff Morgan

Delta Air Lines, Inc.

1212 New York Avenue, N.W.

Suite 200

Washington, D.C. 20005

sascha.vanderbellen@delta.com

sametta.c.barnett@delta.com

jeff.morgan@delta.com

David L. Vaughan

Counsel for United Parcel Service of 

America, Inc.

Kelley Drye Collier Shannon

3050 K Street, N.W.

Suite 400

Washington, D.C. 20007

dvaughan@kelleydrye.com

Hershel I. Kamen

Staff Vice President – International and

 Regulatory Affairs

Continental Airlines, Inc.

Government Affairs—8th Floor

1600 Smith Street

Dept. HQSGV

Houston, TX 77002

hkamen@coair.com
2

R. Bruce Keiner, Jr.

Counsel for Continental Airlines, Inc.

Crowell & Moring LLP

1001 Pennsylvania Ave., N.W.

Washington, D.C. 20004

rbkeiner@crowell.com

John M. Allen

Director

Flight Standards Service

Federal Aviation Administration

800 Independence Avenue, S.W.

Room 821

Washington, D.C. 20591

john.allen@faa.gov 

Joanne W. Young

Counsel for Spirit Airlines, Inc.

Kirstein & Young, PLLC

1750 K Street, N.W.

Suite 200

Washington, D.C. 20006

JYoung@yklaw.com

Jonathan B. Hill

Counsel for JetBlue Airways Corp.

Dow Lohnes PLLC

1200 New Hampshire Ave., N.W., Suite 800

Washington, D.C. 20036

jhill@dowlohnes.com

Edward P. Faberman

Counsel for AirTran Airways, Inc.

Wiley Rein, LLP

1776 K Street, N.W.

Washington, D.C. 20006

efaberman@wileyrein.com

G. Bailey Leopard

Legal and Regulatory Affairs

Federal Express Corporation

3620 Hacks Cross Road

Building B, 3rd Floor

Memphis, TN 38125

gbleopard@fedex.com

John Fredericksen

Vice President – General Counsel

MN Airlines, LLC d/b/a Sun Country 

Airlines

1300 Mendota Heights Road

Mendota Heights, MN 55120

john.fredericksen@suncountry.com

Pierre Murphy

Counsel for Brendan Airways, LLC d/b/a 

USA 3000 Airlines

1200 New Hampshire Ave., N.W.

Washington, D.C. 20036

pmurphy@lopmurphy.com

Gina Marie Lindsey

Chief Executive Officer

Los Angeles World Airports

One World Way

Los Angeles, CA 90045

John L. Martin

Airport Director

San Francisco International Airport 

PO Box 8097 

San Francisco, CA 94128-8097

________________________________

Barbara Russell
VERIFICATION

Pursuant to Title 18 United States Code Section 1001, I, Barbara Russell, in my 

individual capacity and as the authorized representative of the applicant, have not in any manner 

knowingly or willfully falsified, concealed or covered up any material fact or made any false, 

fictitious or fraudulent statement or knowingly used any documents which contain such 

statements in connection with the preparation, filing or prosecution of this exemption 

application. I understand that an individual who is found to have violated the provisions of 18 

U.S.C. Section 1001 shall be fined not more than $10,000 or imprisoned not more than five 

years, or both.

Name: Barbara Russell

Date: June 29, 2010

Title: Associate General Counsel