Transport Airlines

Delta-Virgin deal talks: Delta’s Heathrow hopes and Virgin’s motivations

@rafat

Dec 02, 2012 12:21 pm

Skift Take

Would Delta get maximum benefits if it can hold a majority stake in Virgin Altantic on its own? It seems a bit unwieldy.

— Rafat Ali

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Ian Mutto  / Flickr.com

A Virgin Atlantic plane at London's Heathrow airport. Ian Mutto / Flickr.com


Read our earlier story: Delta is making secret moves to take over Virgin Atlantic

Some more details are leaking out as other outlets confirm Sunday Times‘ scoop from earlier today.

Bloomberg: Virgin has been seeking partners and in 2010 hired Deutsche Bank AG to assess options. This could improve Delta’s access to Europe’s busiest hub Heathrow and its ability to capture lucrative trans-Atlantic business traffic. Delta is working on a $1.2 billion overhaul of its facilities at JFK, catching up to improvements made by rivals.

Virgin isn’t a member of one of the three global airline alliances and has struggled to become profitable amid rising fuel prices and the global economic slowdown. The company posted a pretax loss of 80.2 million pounds for the year ended February.

To broaden its offerings, Virgin is adding short-haul routes to U.K. cities including Manchester from Heathrow, where it can feed intercontinental services to Asia and the U.S.

WSJ: The Asian carrier has been considering selling its stake in Virgin over the past five years and has held talks with a number of airlines including Delta in the past.

FT: Non-European Union companies are not allowed to control EU airlines, but Delta’s partners would be permitted to invest, so letting the alliance take a shared majority stake…Delta would be likely to pay Singapore Airlines less than the £600m it paid for its 49 per cent stake in 1999.

Sir Richard is expected to support the deal on grounds that it would make Virgin Atlantic a stronger number two on US-UK routes.

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