Week in Review

December 7, 2012 5:15 pm

Delta eyes Singapore’s Virgin stake

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The prospect of Sir Richard Branson getting a new partner at Virgin Atlantic re-emerged this week when Singapore Airlines said it was in talks to sell its 49 per cent stake in the carrier, which it bought for £600m in 1999.

Delta Air Lines is the potential buyer, returning to the table after looking at the airline last year but deciding the price was too high.

Should a deal be struck, Singapore will probably take a loss on a purchase that never quite panned out strategically and that has earned the Asian group a poor return on what it paid 13 years ago.

Virgin’s appeal to Delta includes its slots at Heathrow, where the US carrier and its transatlantic partner Air France-KLM struggle to compete with rival partnerships between British Airways and American Airlines and Lufthansa and United.

People close to the talks say a deal between Singapore and Delta could be followed by Virgin joining Delta and Air France-KLM in the SkyTeam alliance; or by Sir Richard selling 5-10 per cent of his majority holding to the Franco-Dutch carrier; or both.

Regulators might baulk at Sir Richard selling part of his majority holding, however, since it would give Delta, the leading partner in the Air France-KLM tie-up, effective control of a European airline in contradiction of EU foreign ownership rules.

Sir Richard has not said whether he is willing to sell. But his launch of a strategic review in 2010 suggests he recognises the challenges of an increasingly isolated and undersized Virgin Atlantic should he stick to the status quo.

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