The Sunday Times ran a long article yesterday which claimed that Delta Airlines of the US is in discussions to take over Virgin Atlantic.
This being aviation, of course, nothing is that simple. A US airline cannot have majority control of a European airline, under EU rules. Delta would therefore buy the 49% of Virgin that is currently owned by Singapore Airlines, whilst providing cash to Air France / KLM to buy and be the legal owner of the 51% stake held by Richard Branson.
Some snippets from the article here (original is behind a paywall so I can’t link):
Delta eyes Virgin Atlantic swoop
The giant American carrier has offered to buy out an Asian investor, paving the way for a possible takeover of Branson’s airline …
Delta Air Lines is understood to have offered to buy Singapore Airlines’ 49% holding in Virgin. If it succeeds, Delta’s European partner, Air France-KLM, may then buy part of Sir Richard Branson’s 51% stake, which would see him relinquish control of the airline for the first time.
Air France-KLM’s involvement is dictated by aviation rules, which say European airlines must be controlled by European nationals. Branson may retain a stake, and would, together with the Franco-Dutch group, hold more than 50%.
The deal would be a watershed for the entrepreneur. He set up Virgin Atlantic in 1984 and it has been instrumental in the rapid expansion of his business empire. Branson has been weighing the airline’s future for several years. Two years ago he appointed Deutsche Bank to examine offers.
Delta and Air France-KLM came close to a deal in February 2011 — The Sunday Times revealed the discussions — but talks broke down over price and Branson’s rights over the Virgin brand.
Aviation industry sources said last week that the two sides were back in negotiations, with Delta having made a direct approach to Singapore Airlines.
The sources cautioned that the talks were at an early stage, and it was not certain a deal would be reached. Singapore paid £600m for its stake in 1999 …..
Delta is America’s biggest carrier by passenger numbers, carrying about 160m a year compared to United Airlines’ 140m. It is part of the Sky Team group along with Air France-KLM. Sky Team is one of the three big commercial alliances that compete for passengers globally. The others are Oneworld, led by BA, American and Qantas, and Star, led by United and Lufthansa and including Singapore Airlines.
Sky Team and Star Alliance are eager to secure a larger presence at Heathrow, one of the world’s key aviation hubs, and the most lucrative. The purchase of Virgin Atlantic would provide that ….
I wrote a post a few weeks ago about Virgin’s possible moves into either SkyTeam or Star Alliance. If this story turns out to be true, it will clearly be SkyTeam, which would be a shame. Let’s see how things pan out.
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