Delta in Talks to Buy Virgin Stake From Singapore Airlines

Sunday, 02 Dec 2012 02:36 PM

 

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Delta Air Lines Inc., the second-largest U.S. carrier, is in talks to buy part or all of Singapore Airlines Ltd.’s 49 percent stake in Virgin Atlantic and gain more access to London’s Heathrow airport, according to people familiar with the situation.

Delta’s European partner in the SkyTeam alliance, Air France KLM, might also take an additional stake in Virgin, said the people, who asked not to be identified discussing a private matter. The talks are at an early stage and it’s possible no agreement will be reached, one of the people said. Billionaire Richard Branson controls 51 percent of the airline.

Virgin, the biggest rival to British Airways at Heathrow, has been seeking partners and in 2010 hired Deutsche Bank AG to assess options. A tie-up between Delta and Virgin could improve the U.S. carrier’s access to Europe’s busiest hub and its ability to capture lucrative trans-Atlantic business traffic.

Spokespeople for Delta, Virgin, Air France-KLM and Singapore Airlines declined to comment. The Delta talks were reported earlier Sunday by the London-based Sunday Times.

Singapore Air paid 600.3 million pounds, or about $961 million today, for its Virgin stake in 1999.

Atlanta-based Delta is working to increase its share of international business travel with moves including a $1.2 billion overhaul of its facilities at John F. Kennedy International Airport in New York, catching up to improvements made by rivals. The airline is also the world’s second-largest carrier.

Virgin Profitability

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. It’s also seeking a replacement for Chief Executive Officer Steve Ridgway, 61, who retires early next year after 11 years in the post. During his tenure the airline emphasized perks such as spa treatments and high-design lounges to win business travelers.

Other formerly independent carriers are gradually joining alliances, with both Qatar Airways and Air Berlin Plc choosing British Airways’ Oneworld grouping this year.

Branson has lobbied antitrust regulators for more than a decade in an unsuccessful effort to stop British Airways from cooperating more closely with AMR Corp.’s American Airlines, the U.S. co-leader of Oneworld, on trans-Atlantic routes.

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