A new US airline planned by Richard Branson must meet US regulations on foreign ownership for it to get off the ground, United States Transportation Secretary Norman Mineta warned on Friday.

Branson, who has said he would like to launch the airline some time next year, brought in veteran Delta Air Lines executive Fred Reid to run it and is in exclusive talks with Airbus for around 20 to 30 planes.

But the British entrepreneur has yet to file a business proposal with US federal regulators.

Speaking to reporters during a trip to Prague, Mineta said the Bush administration would like to relax rules that limit the equity stakes of overseas-based investors in US airlines from 25 percent to 49 percent to spur investment, but that for the moment the usual rules applied.

"Since we require US citizenship to own the majority interest in a US airline, if Mr. Branson were to use his capital to establish a Virgin Express in the United States... the test he's going to have to be able to meet is, is it a US citizen that controls the airline," Mineta said.

"If he is the source of that capital, then it seems to me he would not be able to meet that test."

Branson's Virgin empire, with its Virgin Atlantic and Virgin Blue units, is known to have a number of investors interested in the start-up, but none yet have been made public.

The US Congress has indicated a resistance to any changes, under pressure from labor groups and wary of allowing expanded foreign influence over US airlines flying domestically in an era of heightened aviation security.

(Reuters)