Dec 3, 2012

Delta’s Virgin ambitions make headlines again

Rationalisation fever is on the rise overseas as Delta is reported as seeking control of Virgin Atlantic, which means any game of musical shares could spread to Virgin Australia.

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

SRB in the earlier days of his Australian venture. Are the times a changing? PR photo

Although the motives are all about getting greater access to London slots and the gigantic North Atlantic market, Delta’s intentions toward Virgin Atlantic will no doubt cause more than passing interest in Emirates and Qantas.

The Reuters report, which is out while the US and Euro stock markets are still in Sunday, points to Delta seeking to buy all of Singapore Airlines’ 49% equity in Virgin Atlantic, while Air France would take a sliver of Richard Branson’s private 51% holding to in effect deliver Delta+Air France KLM control over the carrier, whose main asset is its network between the UK and US and the slots it has at London Heathrow and London Gatwick.

Virgin Atlantic flies a daily A340-600 service between London and Sydney via Hong Kong. Branson also owns 26% of Virgin Australia Holdings, and 20% of AirAsia X, which flies between daily between Melbourne, Sydney, Perth and the Gold Coast to Kuala Lumpur, the home base of the AirAsia franchise, in which Branson has no equity.

Delta has a potent joint venture alliance with Virgin Australia across the Pacific to the US, where it could be said there is a substantially unrealised potential for a networking arrangement similar to that between Qantas and American Airlines.

To Asia and Europe, Virgin Australia has a similarly ‘early days much potential’ alliance with Singapore Airlines and its SilkAir subsidiary. Singapore Airlines owns 10% of Virgin Australia and 32% of Tiger Airways Holdings, while Virgin Australia owns 60% of the latter’s Tiger Australia franchise.

The Virgin Australia/Singapore Airlines arrangement overlaps on routes to Europe with its alliance with Abu Dhabi based Etihad Airways, which in turn also owns 10% of Virgin Australia Holdings.

However the largest single holding in Virgin Australia after Richard Branson’s stake is Air New Zealand, on 20%.

While to some the ownership map of Virgin Australia resembles that of the Balkans before the outbreak of World War 1,  it has not as yet shown any public signs of stress fractures.

But a sell down of Richard Branson’s stake in Virgin Atlantic to in effect transfer control to Delta will at the least make people think about how Delta, or the existing partners in Virgin Australia, would react should part of his holding in the Australian carrier also become available for purchase.


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