Singapore Air discusses Virgin sale; Delta said to be buyer

PUBLISHED : Monday, 03 December, 2012, 10:50am
UPDATED : Monday, 03 December, 2012, 2:12pm

Singapore Airlines Ltd. said it’s in talks about selling its 49 per cent stake in Virgin Atlantic after reports that Delta Air Lines Inc. is in interested in buying the shares.

The carrier “is in discussions with interested parties” that may or may not result in a transaction, the city-state’s flag-carrier said in a regulatory statement. Delta, the second-biggest US carrier, is in talks to buy part or all of the minority stake, according to people familiar with the situation.

Delta’s European partner in the SkyTeam alliance, Air-France KLM, might also take a 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 per cent of Virgin.

The airline, 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 US carrier’s access to Europe’s busiest hub and its ability to capture lucrative trans-Atlantic business traffic.

Representatives for Delta, Virgin and Air France-KLM declined to comment. The Delta talks were reported yesterday by the Sunday Times.

Singapore Air paid 600.3 million pounds, or about US$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 US$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 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.

Virgin is adding short-haul routes to UK cities including Manchester from Heathrow, where it can feed intercontinental services to Asia and the US.

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 US co-leader of Oneworld, on trans-Atlantic routes.