BEFORETHE DEPARTMENT OF TRANSPORTATION WASHINGTON, DC
Application of VIRGINAMERICA INC. ) ) ) DocketNo.
______ _ ) for waiverpursuantto Section 1-2 ofPart 241 ) ""-of,,,-,th=e-,,=,D=eJ;:::pa=I=tI=ne=n=t'-,=,-s-=.R=ecc.gu=l=at=io=n=s
______ )
PETITIONOFVIRGINAMERICAINC. FORREVIEW OF STAFF ACTIONUNDER 14 C.F.R. § 385.30 AND CONTINGENT MOTION TO STAYEFFECTIVENESS OF STAFFACTION
Communications withrespectto this document shouldbe sentto:

JohnVarley SeniorVice President &

General Counsel VirginAmerica Inc. 555 AirportBoulevard, Suite 500 Burlingame, CA 94010 (650) 762-7108 (650) 762-7001 (fax) john.varley@virginamerica.com

January 31,2011 John E. Gillick Jonathon H. Foglia Zuckert, Scoutt & Rasenberger L.L.P. 888 Seventeenth Street, N.W., Suite 700 Washington, DC 20006 Tel: (202) 973-7939 Fax: (202) 342-0683 jegillick@zsrlaw.com jhfoglia@Zsrlaw.com Counsel for VirginAmerica Inc.----- ------------------------**~** ,---------------------------

Application of VIRGINAMERICA INC. BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, DC
) ) ) DocketNo.
_______ _ ) for waiverpursuantto Section 1-2 ofPart 241 )**~o"'-f_""th_':!:e'_'D::o..e"".lp"""artm=""'e""'n~t:....::'s'-'R"-!:e"""gu=l~at"'"io""'n"""sc_**______ .)


### PETITION OFVIRGINAMERICAINC. FORREVIEW OF STAFF ACTIONUNDER 14 C.F.R. § 

### 385.30 AND CONTINGENT MOTION TO STAYEFFECTIVENESS OF STAFFACTION
Pursuant to Subpart C ofPart 385 ofthe Department's regulations, Virgin America Inc. ("Virgin America") hereby respectfully petitions for review of the staff action taken by the Director, Office ofAirline Information ("OAr'), Bureau ofTransportation Statistics, Research and Innovative TechnologyAdministration ("Decision"), denying VirginAmerica's request for a waiver from Latin American entityreporting. 1 As demonstrated herein, the Decision is contrary to the Department's rules and directly applicable precedent, is substantially deficient, and involves a substantial and important question ofpolicy. The Decision should, therefore, be set aside, andVirgin America'srequest for a waiver shouldbe granted forthwith. Furthermore, to the extentthe staffaction is not automatically stayedunder theprovisions of 14 C.F.R. 

### § 385.32, Virgin America moves to stay such action pending disposition ofthis petition by the Department, given that the Decision: (i) establishes an immediate deadline of February 15, 2011, for Virgin America to submit Form 41 data under the Latin American

1 Although the Decision is dated January 21,2011, it was not served on Virgin America until January 24,2011, by electronic transmission. 1operating entity; and, more importantly, (ii) is silent as to the effect a petition for review shall have on the effectiveness ofthe action, notwithstanding the requirements of 14 C.F.R. 

### § 385.4 that staffactions "state whether the filing ofa petition shall preclude the action from becoming effective." As a consequence, Virgin America is compelled to include this contingent motion with its petition for review. Background Virgin America began service in August 2007, and has, until recently, only provided domestic air transportation. Virgin America launched international service from San Francisco and Los Angeles to Toronto in June 2010, but, under Part 241 ofthe Department's regulations, Canadian transborder operations are to be reported with "the domestic entity," so this limited international service did not impose any additional, burdensome and costly reporting requirements onVirgin America. See Subsection 21(g).
On December 16, 2010, Virgin America began very limited service to Mexico, with five weekly roundtrips in the San Francisco (SFO}-San Jose del Cabo (SJD) city pair market (or a total of 12 roundtrip flights in December and, indeed, the entire Fourth Quarter of 2010), accounting for only 0.7% of Virgin America's total capacity for the month of December. Beginning on January 19-20, 2011, Virgin America began five weekly roundtrip flights in the Los Angeles (LAX)-Cancun (CUN) city pair market and three weekly roundtrip flights in the SFO-CUN citypairmarket. With the addition ofthis Cancun service, all ofVirgin America's Mexico flights account for only two percent of its total scheduled capacity for the reportable January 2011 period. On a quarterly basis, these Virgin America flights account for only 2.7

2percent ofthe carrier's total scheduled capacity for the three month period ending on March 31, 2011.
Given the very limited scope ofits service to Mexico, Virgin America requested a waiver (copy enclosed as Exhibit A) from the otherwise applicable requirement that the traffic, financial and other data associated with these very limited Mexican operations be compiled and reported separately from the rest of Virgin America's operations under the Latin American operating entity. In that waiver request, Virgin America set forth the extremely limited nature of its Mexican operations, demonstrated the burden and costs associated with setting up a Latin American operating entity, explained that its Mexico service would be only extremely remarkably small part of the overall Latin American system of records compiled by the Department (estimated at only 0.3 percent ofthe ASMs reported by all other

## u.s. carriers in the First Quarter of 2010 for their Latin American operating entities), articulated the manner in which users would be able to retrieve Latin America traffic data from Virgin America's traffic reports and pointed out the Department had previously granted similar waivers to other carriers until their Latin American operations had grown to a point that it was in the public interest to report that information as a separate operating entity.
In this latter regard, and as Virgin America noted in its waiver request, the Department granted a nearly identical waiver to JetBlue on July 29, 2004, permitting JetBlue to report traffic and financial data for its three daily round-trip flights to the Dominican Republic within the "Domestic" operating entity. A copy of the application of and waiver granted to JetBlue are attached as Exhibit B. In granting the waiver, the Department stated that the "reason for the grant of the waiver is the very limited scope of JetBlue's Latin American operations," and

3indicated that the ''waiver will remain in effect until JetBlue increases service to the Latin American entity." Id. 2 However, in a January 21, 2011, letter that failed to provide any meaningful consideration or examination ofthe matters raised in Virgin America's request, much less any mention of the clearly applicable JetBlue precedent, the Director of the Office of Airline Information denied the waiver request stating that, acting under authority delegated by Sections 385.19(d) and (f),3 the office "believes it is [imperative] to keep our data complete for analytical purposes." The Decision merely asserted, without any analysis whatsoever, that the 13 weekly roundtrip flights operated by Virgin America is a "significant" service and the limited grant of the requested waiver would create a "significant" data gap making market analysis aproblem for data users. A copyofthe Decisionis enclosed as Exhibit C.
TheDecision MustImmediatelyBe Reviewed And Reversed For SeveralImportantReasons Section 385.4 ofthe Department's regulations requires that staffaction takenpursuant to assignment under Part 385 must, among other things, contain (i) a briefreference to the right of the aggrieved parties to petition the Reviewing Official for review under applicable procedural rules, including a statement oftime within which such petitions for review must be filed and (ii) all findings, determinations and conclusions which wouldbe required or appropriate ifthey were issued bythe Secretary ofTransportation. Not only does the Decision fail to provide either the required notice or the findings, determinations and conclusions required by Section 385.4 for all staff actions made using authority delegated by the Secretary of Transportation, but, more

2 The Department reconsidered the**wai~er** on March 22, 2005, or about nine months after JetBlue had begun its Dominican Republic service. 3 The waiver sought by Virgin America should have been acted upon under the authority delegated to the Director by Section 385. 19(c), ratherthan (d) or (t), as had beencorrectly citedinthe JetBlue decision. See Exhibit B. 4importantly, it conflicts with directly applicable Department precedent, is substantially deficient in several respects and involves a substantial and important policy question concerning requests for waivers from the otherwise applicable requirements of Part 241 of the Department's regulations. The Decision should, therefore, be reversed and the waiver requested by Virgin America granted until Virgin America "increases service to the Latin American entity" as the Department did inthe JetBlue case. As Virgin America pointed out in its waiver request and also discussed supra, the waiver requested by Virgin America is virtually identical to the waiver the Department considered and granted to JetBlue in 2004. Indeed, JetBlue requested and was granted a waiver covering 21 weekly flights compared to the only 13 weekly flights that Virgin America operates to and from Mexico (or only 63 percent of the flights operated by JetBlue). It defies credulity for the Department to, on the one hand, grant JetBlue a waiver for 21 weekly flights on the basis ofthe "very limited scope ofJetBlue's Latin America operations" and, on the other hand, deny such a request to a carrier operating farfewer Latin America flights than the carrier the Department previouslydeterminedhad a "verylimited" operationinLatinAmerica. Although Virgin America specifically raised this precedent in its waIver request, including acknowledging that the waiver would be withdrawn at some point in the future once Virgin America's operations had grown to a point that it was in the public interest to report that information as a separate operating entity, the Decision neither mentions nor discusses the JetBlue precedent that should, without question, be dispositive ofthe Virgin America waiver request. On this basis alone, the Decision must be reviewed and Virgin America's waiver request granted forthwith.

5Similarly, the Decision fails to provide any, much less the required, reasoned, analysis of the particular and "unusual" (in the words ofSection 1-2) facts and circumstances concerning a request for a waiver from the unnecessarily burdensome imposition ofForm 41 Latin American operating entityreporting requirements where the operation constitutes only a very small fraction ofVirgin America's total scheduled flying

- 0.7 percent in December 2010,2percent in January 2011 and 2.7 percent for the First Quarter of 2011. Moreover, as the Department well knows (and contrary to the erroneous suggestions contained in the Decision), data users of the Department's Form 41 data will be able to easily retrieve Virgin America's Mexico traffic statistics by segment-specific airports, thus permitting these data users to continue to obtain this data without any "gaps."
Balanced against this very limited amount of data to be categorized under the Latin American operating entity for all carriers (estimated at only 0.3 percent ofthe ASMs reported by all other U.S. carriers in the First Quarter of2010) is the significant burden that will be placed upon Virgin America to develop an entirely new and separate set of accounting systems for a Latin American operating entity. Search as one may in the Decision, however, and there is absolutely no mention, much less discussion and analysis, ofwhat should have been a critically important consideration in the Decision

- precisely the type of findings, determinations and conclusions that Section 385.4 requires be included in any decision bya staffmember involving
an authority that has been delegated by the Secretary of Transportation. And, the failure to address these considerations is all the more important when these very same matters were raised by JetBlue in its waiver request and formed the basis of the Department's decision to grant JetBlue the waiver now sought by Virgin America in this petition. These decisions involving authority granted to the Secretary of Transportation by the Congress and delegated by the

6Secretary to a particular Departmental Office demand the very same thoughtfulness and thoroughness as go into Secretarial decisions, a thoughtfulness and thoroughness that is clearly missing from the Decision and for which Departmental precedent already existed. This is the
reason for the requirements contained in Section 385.4, and the Decision should be reversed on this basis as welL Finally the Decision raises a substantial and important question ofDepartmental policy. Section 1-2 of the General Accounting Provisions, contained in Part 241 ofthe Department's regulations, 14 C.F.R. Part 241, upon which JetBlue and Virgin America based their requests, creates a mechanismbywhich an air carrier or a group ofair carriers mayrequest a waiver "from any provision ofthis system of accounts or reports" upon a showing that the waiver is in the public interest and meets three specified criteria. This waiver provision has been in Part 241 for at least four decades and has been used by the Civil Aeronautics Board and the Department on
numerous occasions to respond to "existingpeculiarities orunusual circumstances" that "warrant
a departure from a prescribedprocedure."
The responsibility for making such waiver decisions has been delegated bythe Secretary ofTransportation to the Director ofOAI, allowingthe Director to: (c) Waive any ofthe accounting, reporting, and record retention requirements upon a showing of the existence of such facts, circumstances or other grounds, and subject to such limitations or conditions as may be prescribed for waivers in the applicable regulations, unless such authority is otherwise specifically assigned. 49 C.F.R. § 385.19(c) Acting under such delegated authority, the Assistant Director of OAI granted JetBlue precisely the same waiver requested byVirgin America. Moreover, the explanation contained in
7the Virgin America Decision failed to address, in any manner whatsoever, either the clearly applicable letBlue precedent or the unique facts and circumstances relating to Virgin America's request. Instead, the Decision merely asserted that the missing data would create a significant data gap making market analysis a problem for data users - a "gap" that was, by definition, less than the data "gap" created when the Department granted a waiver to letBlue with its greater numberofweekly operations. Where, as here, Virgin America has been denied a requested waiver based on facts even
more compelling than when the Department's delegated official made each of the findings required by Section 1-2 and then granted a waiver to letBlue "until letBlue increases service to the Latin American entity," a substantial and important question has been raised as to whether any meaning and integrity remains in the Form 41 waiver process. Indeed, if this Virgin America decision is not reviewed and the Department's clearly applicable letBlue precedent followed, there is a serious question as to whether the carriers that are required to follow the Part 241 requirements should have any confidence in the waiver process provided in Section 1-2 going forward. Once again, this Decision must be reviewed and reversed by the Reviewing Official inthe manner specified inPart 385.

8WHEREFORE. for the foregoing reasons, Virgin America Inc. urges the Department to review the Decision, grant Virgin America's request for a waiver as more fully described in its January 7, 2011, letter and, to the extent necessary, stay the effectiveness of the staff action pending dispositionbythe Department.

January 31,2011 Respectfully submitted,

John E. Gillick Jonathon H. Foglia Zuckert, Scoutt & Rasenberger L.L.P. 888 Seventeenth Street, N.W., Suite 700 Washington, DC 20006 Tel: (202) 973-7939 Fax: (202) 342-0683 jegillick@zsrlaw.com jhfoglia@zsrlaw.com Counsel for Virgin America Inc.

9VERIFICATION Pursuant to Section 1001 ofTitle 18 ofthe U.S. Code, I, John E. Gillick, inmyindividual capacity and as the authorizedrepresentative ofthe petitioner, have notin anymannerknowingly and willfully falsified, counseled or failed to disclose 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 orprosecution ofthis petition. I understand that anindividual who is found to have violatedthe provisions of 18 U.S.C. § 1000 shall be fined or imprisonednotmore than five years, orboth.

ohn E. GIllIck January 31,2011Certificate ofService
I hereby certify that a copy ofthe foregoing Petition and Contingent Motion ofVirgin America Inc. was served this 31st dayofJanuary, 2011, byelectronic transmission, on: Ms. Anne Suissa Director, Office ofAirline Information Bureau ofTransportation Statistics Research and Innovative TechnologyAdministration U.S. Department ofTransportation 1200 New JerseyAvenue, SE Washington, DC 20590 anne.suissa@dot.gov Dr. Steven K. Smith Associate Administrator and Director (Acting) Bureau ofTransportation Statistics Research and Innovative TechnologyAdministration U.S. Department ofTransportation 1200 New JerseyAvenue, SE Washington, DC 20590 steven.k.smith@dot.gov

### ~~Foglia Washington, DC

# EXHIBIT A

# america

BY ELECTRONIC MAIL Anne Suissa Director Office ofAirline Information Bureau ofTransportation Statistics January 7,2011

Research and Innovative TechnologyAdministration U.S. DepartmentofTransportation 1200 NewJerseyAve., S.E. Washington, D.C. 20590 DearMs. Suissa: As discussed with you earlier today, Virgin America Inc. ("Virgin America") is requesting a waiver from the otherwise applicable System of Accounts and Reports for large certificated air carriers, 14 C.F.R.Part 241, as more fully described herein. Virgin Americarespectfully submitsthata grantofthis waiverwould beinthepublic interest. Under the Department's reporting requirements (Sections 21-25 of the System of Accounts and Reports), large certificated air carriers must regularly submit detailed onflight marketand nonstop segment data as well as financial resultsto the Department, with separate data reported for each applicable operating entity (Domestic, Latin America, Atlantic and Pacific). Until last month, all of the markets served by Virgin America fell withinthe "Domestic" operating entity and, therefore, Virgin America's traffic and financial datahavenotbeenreportedunderseparate operating entities) On December 16, 2010, Virgin America launched limited service to Mexico, with 5 weekly roundtrips in the San Francisco (,'SFO")-San Jose del Cabo ("SJD") city pair. Virgin America plans to introduce 5 weekly roundtrip flights in the Los Angeles ("LAX")-Cancun ("CUN") city pair and 3 weekly roundtrip flights in the SFO-CUN city pair beginning on January 19-20,2011. These additional flights will, however, constitute onlya very small fractiOi1 ofVirgin America's total scheduled flying. For example, Virgin America projects thatitwill operate AlthoughVirginAmerica servesToronto, Canada, underthe Department'sregulations "the domestic entity
...shall also include Canadian transborderoperations." See Subsection21(g). 5:,)5 Airport Boukward T 650.762.7000 www.virginamerica.Gom Burlingame, CA 940'j 0 F 650,7(32.7001Anne Suissa January 7, 2011 Page 2
no more than 12 roundtrip flights in the SFO-SJD market for the reportable December 2010 period, accounting for about 0.7% of its total capacity. Virgin America further anticipates that, with the addition ofCUN service, all ofits Mexico flights will account for no more than 2% of its total scheduled capacity for the reportable January 2011 period. Furthermore, when measured on a quarterly basis, Virgin America projects that these flights will account for only 2.7% of the carrier's total scheduled capacity for the three month period ending on March 31, 2011. Virgin America would ordinarily be required to separately report data for these flights under the "Latin America" operating entity. However, and as set forth above, these flights will be the only Virgin America operations that do not fall within the Domestic operating entity. As a consequence, the added costto VirginAmerica ofsettingup an entire setofseparate accounting records for a Latin American entitythat is only a very small part ofVirgin America's scheduled system clearly outweighs any benefits that will be provided to the overall Latin American system ofrecords compiled by the Department. Indeed, the ASMs that will beflown by Virgin America in thefirstquarter of2011 in Mexico constitutes only 0.3 percent ofthe ASMs reported by all other U.S. carriers in the first quarter of2010 for their LatinAmerican entities. Turning to the criteria that must guide the Department in its review ofthis waiver request under Section 1-2 of Part 241, Virgin America submits that these particular circumstances warrant a departure from the otherwise applicable reporting procedures. Operating and financial results for Mexico will constitute but a small portion of Virgin America's total reportable data and, in any event, users ofthe Department's Form 41 data will be able to easily retrieve Virgin America's Mexico traffic statistics by segment specific airports. As a consequence, the alternative method proposed by Virgin America 

### (i.e., inclusion ofthe operatingand financial results in the Domestic operating entity) will result "in a substantially equivalent portrayal of operating results or financial condition, consistent with the principles embodied in the provisions ofthis system of accounts and reports." Id. Moreover, the alternative procedure which Virgin America proposes will effectively maintain the "uniformity in substantive results as between air carriers." Id. Furthermore, it is not in the public interest for Virgin America to expend significant resources to set up an entirely separate set of accounting systems for such a limited amount of information. Finally, it is Virgin America's understanding that similar waivers have been granted to carriersinthe past until theirLatin American operations had grown to the pointthat it was in the public interestto reportthat information as a separate Latin American entity. For the foregoing reasons, Virgin America respectfully urges the Department to grant its waiver to the extent necessary to allow the carrier to include operating and

T FAnneSuissa January 7, 2011 Page 3 financial results for these very limited Mexican operations within the Domestic operating entity. Please contactme at 650-762-7108 ifyou have anyquestions relatedto this request. Very trulyyours,

555 Airport Boulev8fej T 650,762,7000 www.vlrqjnarnE":r!ca.com Burlingarne, Gf\ 940'10 F 650,762.700'1

# EXHIBIT B

# jetBlueMay2S,2004

Department ofTranspolUtlOn Office ofAirlineInformation K-2S Room412S BureauofTransponation Statistics 400 7Ci StreetS.W. Wuhington,D. C. 20590
IetBlue 

### Airways Corporation was

### recently granted authority by theDepartment of l'Iansportationto conductscheduledWVice tothe DominicanRepublic, whichweplan to commenceinJune 2004.**~tly,** wehave scheduledtwo daily round trip flights between New York.and Santiago and ODt

### dailyroundtrip flightbetween New 

### York and SantoDomingo. Thtl total available seatmiles gertetatedon thoseroutes is initially going toreprcllc:nt apPl'QJtimatcly 1.5% ofourtotal system. capacity, and will decline as we continue to add more domestic:: service. We cummtly onlyreport the**do~fltic** f:ntity on Form41. As theDominican operations will repreeent asu<:h a smallpercentage ofout $ystemcapacity BOd**Hpar~tely**reponing these operations woulddisclose the flight aegmc:;ntprofitabilityforthese two citypain, we IltOrequesting anexemptionto**tl\ertqllirem~nt** outlined 14 CPR Section 3241.21(g) for separliWlyreporting I Latin Americain ourFonn41 filings. We appreciate YOitt' consideration ofthis requellt Please contactme 203.656-7604 ifyou have 

### any questions orrequire any additional data.

# ~
.HollyNelson VP & Controller

JetBlua**~I/WtIya** corpOrlIUon 19 Old Kine- HICIlWII)' SoIIth, Sulle**<!~.** Oirilfl, CT ()682Q T.I 1203) 6!6-7600**~1Ilt** (20') 656-744/1 To fly, _.jltbIUMom or 1(800) JETB\.UEV,$. oepanment 01Transponotlon Bureau of**T~n** ItatllffCi

Ms. Rolly Nelson VP & Controller letBlueAirways CotpOfation 19 OldKings Highway Sooth Suite 23 Darien, 

### cr06820 DearMs.Nelson! 

### J.l 29 im4

Thi.letter grant!! yourrequest thatJetBlue be allowed to report its two daily New**York~** Santiago. DominiCM Republic flixhts andits one daily New York-Santo Domingo flight in theDomestic Bntity. The waiver will remaineffectiveuntil JetBlue increases service to theLatin America entity. Thereason focthe grant ofthe waiveris the very limjredscope ofJctBJue's Latin AmMcaoperations. This actionistaken underauthoritypnled by 14CPR,section 385.19(e). Ifyou have any qge.stions. please contsctMr.**:&mi~** Stankus at**amtm1,stankus(j!btsl~V** orat (202)366-4387. SinCCll:ly, 

# cJJDJ/7J."**~**

DonaldW. Bright Assistant Director Airline Information

# EXHIBIT C- - -- -- -------- - - ----- -----------------------------------

U.S. Department of Transportation Research and Innovative Technology Administration John Varley SeniorVice President and General Counsel Virgin America 555 Airport Boulevard Burlingame. CA 94010 DearMr. Varley: 1

1200 NewJersey Avenue, S.E. Washington, D.C. 20590
January 21, 2011

We are denying your request, dated January 7, 2011 seeking a waiverfor Virgin America from Latin America entity reporting. Wereviewed yourreasons for the waiverrequest and consulted with the DOToffices that use entity data. The Office ofAirlineInformation (OAl) believes it is imperitive to keep our data complete for analytical purposes. While Virgin America operated only 12round trips to Mexico in December, it soon will be operating 13 weeldyroundtrip flights to Mexico with large aircraft. This is a significant service and the missing data would create a significant data gap making market analysis a problem for data users. Your LatinAmeric entity code is 11020. The strut datefor your LatinAmerica entity reporting is December 16,2010. Yourfirst report requiring a break-out of Latin Entity data is your DecemberP-12(a) Fuel Consumption by Type of Service andEntity. which was due on January 20,2011. T-100 trafficreport forDecemberare due onJanuary 30,2011. QuarterlyFOlID 41 fmaneial reports are due onFebruary 10,2011. OAlis extending the due dates for all Virgin America's Decemberreports to February 15,2011. Since Virgin America did not include Latin America fuel use onits December ScheduleP-12(a), we are expecting a revised reportby February 15,2011.This action is taken under authority delegated by 14 CPR 385.19(d) and (f). You may file a petition for reconsideration within 10 days ofthe date ofthis letterin accordance to the provisions of 14 CPR 302.14. Sincerely,

Anne Suissa Director Airline Information 2