Delta buys stake in Virgin Atlantic
 

Chicago Tribune
Delta buys 49% stake in Virgin Atlantic

Reuters
9:39 am, December 11, 2012
Delta Air Lines is buying Singapore Airlines' 49 percent stake in Virgin Atlantic for $360 million and has agreed to a transatlantic joint venture with the British carrier, expanding its access to London's capacity-constrained Heathrow airport.

Under the joint venture announced on Tuesday, Delta and Virgin would share costs and revenues on routes between Britain and North America.

The pair plan to cooperate on services between New York and London, with a total of nine daily round-trip flights from London Heathrow to John F. Kennedy International Airport in New York and Newark Liberty International Airport in New Jersey.

Delta, the second-largest U.S. airline by revenue after United Continental, has acquired stakes in Grupo Aeromexico and Brazil's Gol Linhas Aereas over the past year, and has long hoped to break into Heathrow. In recent years, it has invested heavily to build a major hub in New York.

The tie-up with Delta will be a shot in the arm for Virgin Atlantic, which is the second-largest carrier at Heathrow after IAG's British Airways. It has been battered by rising fuel prices and the euro zone crisis. It lost 80 million pounds ($128 million) in its last full year.

The Virgin Atlantic partnership will "provide a more effective competitor between North America and the U.K., particularly on the New York-London route, which is the largest airline route between the U.S. and Europe," Delta Chief Executive Richard Anderson said in a statement.

The airlines said they would file an application with the U.S. Department of Transportation for competition clearance and said the deal would need to be reviewed by the U.S. Department of Justice and the European Union's competition regulator.

The deal will give Delta greater access at London's Heathrow, a lucrative hub for corporate passengers where landing slots are generally hard to acquire. Heathrow, Europe's busiest airport, is operating at close to full capacity after Britain's coalition government blocked its expansion in 2010.

British entrepreneur Richard Branson said he would retain his 51 percent stake in Virgin Atlantic and maintain the brand of the airline he founded in 1984.

"The partnership allows both carriers to offer a greatly expanded network at Heathrow and to overcome slot constraints, which have limited the growth and competitive capability of both airlines," Branson said.

The two carriers will operate a total of 31 peak-day round-trip flights between Britain and North America, 23 of which operate at London Heathrow.

The partnership will be similar to that operated by American Airlines and BA since 2010 on transatlantic and some European routes.

Singapore Airlines bought 49 percent of Virgin Atlantic for $965 million in 1999, but has been open to selling its stake since at least mid-2011.

Singapore Airlines has been refocusing on its key markets where it is under pressure from budget airlines, launching its own budget carrier, Scoot, to ply Asian middle-distance routes and bolstering its Asian regional carrier, SilkAir.

Delta guys.. Is this a yay or nay? Shift of intl flying eventually?

Good for Delta. Bad for the Delta pilots. More outsourced flying.

Hard to say. DALPA must still negotiate the LOA for the JV. The AF/KLM/Alitalia JV has Delta pilot's with 50% of the flying and the other 50% is split between AF/KLM/Alitalia.

You can't say this yet, as the LOA for the JV has yet to be released.

Usually under JBVs each airline is required to maintain a minimum # of flights under the agreement. So the real question is, will DL add more JFK-LHR frequencies on top of what they already have? Any addition is a plus for the pilots. I would cautiously say it's a good thing unless they cut other frequencies to allow VS more.

Another thing to consider is Virgin Atlantic has been losing money for quite sometime. Just a few days ago RB announced that VA would begin local service to compete with British Airways. It's quite possible that DAL will be providing a large portion of the international service from the USA to feed the new domestic service by VA.

How many flights does Delta do between the U.S and the U.K right now and how many flights does Virgin do between the U.S. and the U.K. right now? Whatever that ratio is will most likely be what the JV will have as a base ratio. I would imagine that any future growth would be split 50/50.

Going forward that would be a win for Delta pilots because if we maintain the current ratio we don't lose anything and without this JV we would most likely not have any future growth into Heathrow. As a corporation we absolutely need this to compete with AA/BA. And $360 million is a steal to own half of Virgin!

It's Anderson going after AA/BA in a big way.

Singapore Airines paid $965 million for the 49% stake in 1999!

Plus their share of losses. Total notated value for them was around 1.3 Billion and change. They wrote it off to zero.

As usual, Holly Hegemon's friends are excellent tipsters.

Nailed:

• NWA acquisition of Delta
• 717 Deal
• Delta PWA deets
• Price for VA share