December 10, 2012 5:07 pm

Branson vows to hold on to Virgin stake

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Sir Richard Branson on Monday signalled he is not planning to relinquish control of Virgin Atlantic, as Delta Air Lines of the US closes in on a deal to buy a 49 per cent stake in the UK carrier.

Sir Richard’s Virgin Group owns 51 per cent of Virgin Atlantic, and Delta has been in talks to buy the remaining equity from Singapore Airlines, which paid £600m for the 49 per cent stake in 1999.

A deal could be unveiled as soon as Tuesday, with Barclays analysts saying that the 49 per cent stake could now be worth between $200m and $300m.

Willie Walsh, chief executive of International Airlines Group, parent of British Airways, has predicted that the Virgin Atlantic brand could disappear if Delta buys out Singapore Airlines.

That prompted Sir Richard, who founded Virgin Atlantic in 1984, to say: “Rumours have been spread in the press that I am planning to give up control of Virgin Atlantic and, according to Willie Walsh, who runs BA, that our brand will soon disappear. This is wishful thinking and totally misguided.”

Sir Richard said he would pay £1m to British Airways’ staff should Virgin Atlantic disappear in the next five years. If Virgin survives, he added British Airways should pay £1m to his carrier’s staff.

Delta’s expected investment in Virgin Atlantic could be accompanied by plans for a code-share agreement between the two airlines.

However, Virgin, which reported a pre-tax loss of £80m in 2011-12, is interested in going beyond a simple code-share by forming a joint venture with Delta on routes over the North Atlantic.

Virgin is heavily focused on services between the UK and the US, but it is being squeezed by three joint ventures on these routes. They involve Air France-KLM and Delta; British Airways and American Airlines; and Lufthansa and United.

The airlines inside the three joint businesses co-ordinate their schedules so as to offer better services to customers, notably business travellers.

David Fintzen, analyst at Barclays, said Virgin could provide Delta with increased access to London’s capacity-constrained Heathrow airport.

He estimated Virgin had 3.4 per cent share of Heathrow’s take-off and landing slots, compared to Delta’s 1.3 per cent.

Air France-KLM has been evaluating the case for buying part of Virgin Group’s stake in Virgin Atlantic, in a move that could enable the Franco-Dutch carrier to control the UK carrier in tandem with Delta.

However, no decisions have been taken by Air-France KLM on whether to proceed with an offer for part of Virgin Atlantic’s equity.

Air France-KLM said it was not part of the negotiations between Delta and Singapore Airlines about Virgin Atlantic. The Franco-Dutch carrier declined to comment further.

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