Virgin America planned to launch U.S. airline service this month with flights between San Francisco and New York. It would have added Los Angeles and Chicago later. Now that new service is up in the air because of outmoded U.S. rules banning foreigners from controlling domestic airlines.

The U.S. Transportation Department decreed that Virgin America is too closely related to billionaire Richard Branson's Virgin Atlantic, so the feds late last month denied permission for Virgin America to operate until the airline can prove it's controlled by Americans. According to U.S. rules adopted in the 1930s, foreigners can't own more than 49 percent or control more than 25 percent of voting rights of U.S. airlines. The Transportation Department concluded that Virgin America's "close relationship" with British-based Virgin Group, parent of Virgin Atlantic, "indicates that the carrier is not under the actual control of U.S. citizens."

This decision was hailed by organized labor and by some airlines, notably Continental. The Air Line Pilots Union raised the concern that changing the rules would create a national security problem.

Steel, telecommunications, auto manufacturing, financial services and a host of other industries have long enjoyed the benefits of foreign investment. The domestic airline industry hasn't posted a profit since 2000 (although it's expected to for 2006.) It's in desperate need of new sources of capital, which could be provided by foreign investors. Without new capital, U.S. carriers are unlikely to become financially healthy enough to expand and compete with the likes of such global giants as Singapore Airlines, Cathay Pacific and Air France KLM.

UAL Chairman and CEO Glenn Tilton pointed out at a recent aviation conference in Chicago that not one U.S. airline is among the 20 most profitable international carriers in the world. Tilton noted that United was the first major customer for the Boeing 777 a decade ago. The first major customer for Boeing's new Dreamliner, the 787 — the next generation of aircraft — is Japan's All Nippon Airways. It has ordered 50 planes — more than all U.S. passenger airlines combined.

National security is a red herring in this debate. The government controls airline security in the United States — not the airlines. Thousands of foreign-owned commercial jets land and take off from American airports every day. Those jets and their foreign owners must comply with U.S. security rules, just like any United, American or Southwest flight.

Those opposed to more foreign investment in U.S. airlines aren't eager to see another scrappy competitor take wing, especially one offering premium service at low prices. Branson has a track record in creating successful air service. Let him — and any other foreign investors with money to burn — have a go at the U.S. market. Wouldn't passengers love a new airline offering premium service at low prices?

The ownership cap should be lifted. It denies the United States more airline competition, lower prices and the 3,000 jobs that Virgin America says it would create.