Might be good for DAL Inc, but I don't see this being good for DAL pilots

Virgin Atlantic Acknowledges Deal Interest After Report of Delta Approach - Bloomberg

Richard Branson’s Virgin Atlantic Airways Ltd., which signaled interest in a merger six months ago, said it has attracted approaches from several parties.
“We’ve received a number of lines of enquiry,” Virgin spokesman Greg Dawson said in a statement late yesterday, adding that adviser Deutsche Bank AG’s work on the plan will take a number of months and that it’s “far too early” to give details.

Closely held Virgin confirmed the contacts after Sky News said Delta Air Lines Inc. was among carriers exploring a tie-up. The Crawley, England-based company, in which Branson has a 51 percent stake, hired Deutsche Bank after competitors used mergers to bulk up and trans-Atlantic rivals British Airways Plc and AMR Corp.’s American Airlines won approval to deepen ties.

“Virgin Atlantic has got to be in some sort of alliance to get critical marketing mass,” said Andrew Miller, chief executive officer of CAPA Consulting LLC, which advises airlines. “In the new world where airlines are struggling to survive, doing it alone is going to be difficult”
Airline earnings may drop 40 percent next year on slower economic growth, higher fuel costs and state austerity measures, the International Air Transport Association said yesterday.

Virgin, part-owned by Singapore Airlines Ltd., isn’t in one of the three big global alliances that help carriers cooperate through code-share deals and marketing pacts. The company flies to 30 cities, 10 of them in the U.S., according to its website.

Gulf Interest

In addition to Atlanta-based Delta, other interest has come from Gulf carriers, Sky News said in its report, without identifying specific airlines. Like Virgin, Middle Eastern operators such as Dubai-based Emirates aren’t in alliances.

John Strickland, director of the JLS aviation consultancy, said such a tie-up was less likely than one in the U.S.

“I’m skeptical that a Middle Eastern company would be interested,” Strickland said. “They tend to plow their own furrow, and they don’t gain further access to the world because they already have that.”

A deal with Virgin would help Delta’s SkyTeam alliance bolster operations at London’s Heathrow airport, the busiest in Europe. The group doesn’t have a U.K. member, whereas British Airways is in Oneworld and the Star Alliance includes Deutsche Lufthansa AG unit BMI, the second-largest carrier at Heathrow.

“As a matter of policy, we don’t comment on industry rumor or speculation about potential partnerships,” said Betsy Talton, a spokeswoman for Delta.
Complicating Factors

Virgin might be open to consolidation, CEO Steve Ridgway said in a June interview with Bloomberg Television. There is potential for Virgin to “grow to become part of a bigger group,” he said.

Talks on a merger could be complicated by Singapore Airlines’ 49 percent stake in Virgin, which Branson sold for 600 million pounds ($946 million) in 1999, and by regulations hindering cross-continental ownership, CAPA’s Miller said.

“If you don’t have effective control, what can you get out of it?” he said. “Until laws on ownership change, airlines will continue to use alliances and cooperative agreements to expand.”

Ridgway said in June that Singapore Air’s holding could be offered for sale as the Asian carrier modifies its strategy to reflect the expansion of the Indian and Chinese markets. The world’s second-largest carrier by market value has repeatedly said it’s exploring options regarding the stake. Spokesman Nicholas Ionides today referred all questions to Virgin.

BA Threat

British Airways, American and Iberia Lineas Aereas de Espana SA in October began a trans-Atlantic alliance by sharing booking codes on more than 2,700 services. Virgin had campaigned against regulatory approval for the tie-up. BA and Madrid-based Iberia are also set to complete a merger next month.

Virgin Atlantic operates 35 twin-aisle planes, according to data provided by London-based Ascend Worldwide Ltd. Ten Airbus SAS A330s will join the fleet from early next year, according to the airline’s website. Virgin has also ordered six Airbus A380 superjumbos for delivery from 2015 and 15 Boeing Co. 787 Dreamliners that will start operations beginning in 2014.