Virgin ready for alliance as Delta may buy stake

, Bloomberg

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Virgin Atlantic Airways Ltd., which flew solo for a decade as rivals formed the global groups that dominate the industry, may be about to come in from the cold as Singapore Airlines Ltd. considers selling its 49 percent stake.

With Delta Air Lines Inc. mulling a bid, according to two people familiar with the matter, Virgin could form a North Atlantic venture with the U.S. carrier and its European partner Air France-KLM Group while joining the pair's SkyTeam alliance.

"Virgin has rather lost its way as the world consolidates and they really need to bite the bullet," said John Strickland, director of JLS Consulting in London. "Signing up to SkyTeam would be part of it, I'm sure, and they could bring a rock solid basis to Delta's trans-Atlantic alliance with Air France-KLM."

Richard Branson, Virgin Atlantic's founder and the holder of a 51 percent stake, said last month that he's seeking an alliance for the carrier, which faces pressure from rising fuel prices and a joint venture of British Airways and AMR Corp.'s American Airlines at its London's Heathrow airport base.

Any sale is likely to see billionaire entrepreneur Branson remain in control of Virgin Atlantic, Steve Ridgway, the airline's chief executive officer, said today in an interview.

"He is the majority shareholder," Ridgway said following a statement from Singapore Air overnight. "What they said today, it's about Singapore selling some or all of their stake."

For Atlanta-based Delta, the second-biggest U.S. airline, a deal would increase access to Europe's busiest hub and boost its ability to capture lucrative trans-Atlantic business traffic.

"Virgin Atlantic has some interesting slots at Heathrow and slots are a very scarce commodity in the U.K.," said Arnaud Bouchet, a Singapore-based analyst at BNP Paribas SA.

Negotiations with "interested parties" may not result in a transaction, Singapore Airlines said in its statement.

Delta is discussing buying all or part of the Singapore stake, said the people, who asked not to be identified as the matter is private. As a U.S. company, 49 percent is the maximum holding it can take under European Union rules. Air France-KLM, Europe's top carrier, might also purchase stock, they said.

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