The department said the Virgin's reconfigured ownership and management structure "should meet U.S. ownership rules" that limit foreign control of a U.S. airline to 25 percent.
But to comply fully, the proposed carrier must take five more steps, including replacing former Delta Air Lines Inc. President Fred Reid, who Virgin Group Ltd. Chairman Richard Branson hired to get the project off the ground.
Replacing Reid with a chief executive "who has no prior affiliation" with Virgin would "substantially" ease concerns about Virgin America's independence -- a move the airline already said it would make to get approval.
The airline may keep Reid as a consultant for six months, the department said.
Among other requirements, the airline must also agree to report to the department if Britain's Virgin Group plans to make additional loans to Virgin America.