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Feb 21, 2011

Who started the Virgin Atlantic Air France Delta rumor?

The Sunday Times report that Air France KLM and Delta are planning a bid for part of Virgin Atlantic is fascinating but lacking in detail. The crucial question is, who placed the sto

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The Sunday Times report that Air France KLM and Delta are planning a bid for part of Virgin Atlantic is fascinating but lacking in detail.

The crucial question is, who placed the story? If it came from Richard Branson’s team it can most likely be seen as a move to encourage Lufthansa, or just possibly, the owners of Etihad,  to play their cards.  If it did originate from sources aware of a bid being contemplated by Air France KLM in conjunction with Delta then the story becomes more immediately exciting.

Any clarifying statement or denial from Air France KLM is unlikely for some hours yet, since it is late Sunday night in Europe.

The basic geography of the future-of-Virgin-Atlantic-story, which has been kick started twice by Branson in the last six months, is that his private company owns 51 per cent of Virgin Atlantic and Singapore Airlines owns the other 49 per cent, and has wanted to sell it for some time.

Virgin Blue being 26 per cent owned by Branson is not, to be the best of public knowledge at this hour, involved in his search for a merger or sale solution for his Virgin Atlantic stake in the aftermath of US and UK approval of a trans Atlantic operational merger between British Airways, American Airlines and Iberia.

Branson has made the point, that few would dispute, that this merger marginalises Virgin Atlantic to a degree where its long term survival requires it to become part of a larger competitive entity. There is a view that anything which involves British Airways, American Airlines and Iberia acting in concert is certain to result in an almighty stuff up and that Branson should embrace it with good humored enthusiasm, however this is a minority view and clearly not one he endorses.

The rumors, and story, do not make it clear where, or if, the strategies of Singapore Airlines and Branson might overlap. Singapore Airlines would be aware of the market power in relation to major European hub airports that Air France KLM, or Lufthansa, would gain if either effectively controlled Virgin Atlantic as the UK’s second major long haul flag carrier.  So it is fair to assume that the Singaporeans would not sell their 49 per cent of Virgin Atlantic to anyone who could use it to inflict commercial pain on their operations unless it was priced with a premium for such a risk.

Nor is it clear if we are looking at a situation where both the Singaporean and privately held Branson stake in Virgin Atlantic are likely to be sold in the one deal.

It could be that anything is possible, and that something is going to happen, depending on just how keen the buyers are.

In the Australian context, Virgin Blue now has strong alliances with Etihad (for access to Europe, central Asia, and for the adventurous, the Middle East), and with Air New Zealand, for trans Tasman routes. It has a pending deal with Delta that would yield some benefits to the US.  And it is on the prowl for a strong relationship in Asia, obviously including China.

If Virgin Atlantic, which has been a near invisible player in this market, were to become part of the Air France KLM, or Lufthansa, or Etihad groupings, all of those possibilities come with strongly positive opportunities for Virgin Blue…or whatever it is about to be rebranded.

Which is as good a point as any for starting another rumor, actually just a thought, that the obvious, blindingly obvious, best partner for Virgin Blue in Asia would be Singapore Airlines. Especially a Singapore Airlines that assisted Virgin Blue’s growth across the Pacific to the US by operating some of those routes that are just going begging for competition from a second Australian flag carrier.  Changi and Abu Dhabi hubs! All bases covered.

Just a thought!

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

Ben Sandilands has reported and analysed the mechanical mobility of humanity since late 1960 - the end of the age of great scheduled ocean liners and coastal steamers and the start of the jet age. He’s worked in newspapers, radio and TV in a wide range of roles as a journalist at home and abroad for 56 years, the last 18 freelance.

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2 thoughts on “Who started the Virgin Atlantic Air France Delta rumor?

  1. Apparently, Virgin Atlantic is not worth much to anybody, so they have to resort to starting rumours in order to put it into play? It would seem that somebody could buy VS for less than the cost of all of its slots, then just dump VS, as we know it, and use the slots for other purposes. Maybe SkyTeam is looking at exactly that? Which, as Ben implies, would bring Star Alliance in to try to block that. Why does it require a rumour to create thinking along such lines?

    I flew VS from Dubai to London and back to Dubai and found it mediocre in every way – except for catering, which was dismal. The “snack” consisted of a little plastic bag with four or five Gummy Bears in it. Talk about false advertising!