Delta About To Take Over Virgin Atlantic?

Discussion in 'Delta Air Lines | SkyMiles' started by From NYC, Dec 2, 2012.  |  Print Topic

  1. From NYC
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    There’s an article in today’s Sunday Times (UK) that Delta is about to buy out all of Singapore’s 49% stake and that AF-KLM will buy a portion of Branson’s own stake in order to take control.

    The Times operates a pay-wall for online viewing, but the article can be found here:
    http://www.thesundaytimes.co.uk/sto/business/Industry/article1170291.ece

    Delta eyes Virgin Atlantic swoop

    The giant American carrier has offered to buy out an Asian investor, paving the way for a possible takeover of Branson’s airline
    Dominic O’Connell Published: 2 December 2012
    Comment (1) Print
    Sir Richard Branson holds a 51% stake in Virgin Atlantic (Rex Features)
    AMERICA’S largest airline is plotting to take control of Virgin Atlantic after making a secret approach to the British carrier’s big Asian shareholder.

    Delta Air Lines is understood to have offered to buy Singapore Airlines’ 49% holding in Virgin. If it succeeds, Delta’s European partner, Air France-KLM, may then buy part of Sir Richard Branson’s 51% stake, which would see him relinquish control of the airline for the first time.

    Air France-KLM’s involvement is dictated by aviation rules, which say European airlines must be controlled by European nationals. Branson may retain a stake, and would, together with the Franco-Dutch group, hold more than 50%.

    The deal would be a watershed for the entrepreneur. He set up Virgin Atlantic in 1984 and it has been instrumental in the rapid expansion of his business empire...
     
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  2. rwoman
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    rwoman Gold Member

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    Would SQ be willing to sell?!
     
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  3. From NYC
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    SQ’s been apparently looking to sell their stake for a while now. But that would only get someone to 49%. Branson has to be willing to sell some of his shares, i.e. be willing to give up control.
     
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  4. canucklehead
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    Wow if it happens!

    Interesting if DL buys 49% & AF-KLM also buy a portion, as it has to be European-owned, would AF run it?

    Another question is it really good to have three international hubs so close (CDG, LHR, AMS).
     
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  5. TravelerRob
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    This is slightly misleading I think. Even if DL is successful in buying out SQ's 49% stake then they still only own 49% and not a majority. And even if AF/KL buy some part of Branson's remaining majority shareholder status to get him under 50.1% that still leaves DL holding 49% and AF/KL holding somewhere north of 1%. Last I checked, DL and AF/KL are not the same company. They may vote the same on the Virgin Board because they are the largest and most well-equipped airline alliance in the world right now but it doesn't give DL any majority. Who knows? Down the road this could cause a major rift between DL and AF/KL and then the break up of the JV and then the break up of SkyTeam :p (That's slightly tongue-in-cheek).

    -Rob
     
  6. MalcoveMagnesia
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    I really really hope this isn't true.

    I've never flown Virgin Atlantic and have always wanted to (and certainly would be able to, if I were able to redeem my massive pile of SkyPesos to do it), but their approach to most everything seems different than stuffy ol' Delta. While all air carriers have a profit motive, my impression is that Virgin Atlantic has a better soft product for both Business and Economy PAX.

    If Delta buys Virgin Atlantic, everybody is gonna lose: the drastically different employee bases and their way different cultures, passengers and the less competitive fares that are going to go up, less choices in our air travels, etc.
     
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  7. jbcarioca
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    This seems not to be speculative reporting. ST needs to do something about London, and this would give them slots and a serious base. They could also solve some basic Virgin needs. Were I in DL/AF-KL shoes I'd try hard to make this happen. SQ would finally be able to shed itself of a non-productive investment, from a network perspective.
     
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  8. From NYC
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    DL & SQ have had these talks before, so....

    However, the idea of hubs in London, and Paris and Amsterdam is a bit boggling. Would you fly into LHR in order to connect to a shirt flight to CDG or AMS in order to get your real ongoing connection? Or are they just going to live with Virgin's existing routes? Or simply trade the slots for something someplace else? Beyond my brainpower at the present moment.
     
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  9. Davescj
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    I would be VERY interested to see what regulators (both European and US) say about this before I got too excited.

    However, what I would guess would happen (pure speculation) is that the Virgin Atlantic would cease and some split between AF/KL and and DL would result. Why would either company want to mutually run another airline? I would see them wanting the LHR slots, however, for flights to/from N. america as well as other destinations.

    Dave
     
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  10. dayone
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    A wildly misleading thread title.

    Not even 10 time zones close to "about."
     
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  11. TRAVELSIG
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  12. jbcarioca
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    Conditions were different a year ago, and SQ had less pressure themselves, so...I suspect there may be higher probability this time than last. As for three hubs;

    AMS is continuing to be reduced in size and emphasis, most obviously in the l LH fleet renovation plans for KL. MD-11's there still are, 7 of them, and the B747's also, but...the only new KL aircraft on order IIRC are 23 B787-9's. That suggests that the plans for downsizing the aircraft in the LH fleet are real, just as KL people ahve said for a long time, albeit usually informally. Thus, I believe AMS will remain as a Dutch-oriented mini-hub, but not as a general-purpose hub. Even today there are a good many AMS connections that serve places such as DPS and CGK, but fewer to locations outside areas of Dutch influence. B787-9 will handle these routes nicely with less surplus capacity and operating cost than the present fleet. So much for AMS as a hub. Will KL be able to stop the perennial losses this way? Good question and I will not hazard a guess. Despite the charms of AMS itself, one of my favorite connecting airports, there is not much compelling reason to keep ,pouring resources into mainline hubbing.

    LHR has major appeal, especially for DL, and as a LH hub it is attractive too, despite the horrors of the curfews, capacity constraints and the strange Spanish-run BAA. It is not easy to overestimate the value of the VS slots, nor of Virgin brand equity. The 6 order and 6 options for A380's also will help slot capacity at LHR, particularly for JFK and other very dense routes. DL would never buy new aircraft on it's own, it seems, but they may see some advantages in high-load aircraft for LHR operations, where ground capacity is far greater than runway capacity. It is not unlikely to imagine that they might find ways to migrate to B777X/A350-1000 or similar large capacity solutions. In the meantime, AF/KL are in serious need of more slots/capacity at LHR.

    BTW, don't forget that AF operated A380 CDG/LHR for some time in the beginning stages of that deployment. There is no doubt that they are examining every option to increase LHR capacity. It seems to me that Japan domestic and Europe-London questions are very similar, so a 1000 passenger short-haul A380 or B748 is not impossible at all.

    I am not arguing that these points are the way they'll go. If they do assume control of VS, somehow. I do argue that these points cannot be far from their thinking. The admirable Sir Richard does need some creative thinking to get out of the box constraining VS at the moment. He's almost certain to see clearly where his best interests lie.

    Whatever happens this time around will be much more entertaining than was the one last year IMHO.
     
  13. PanAm
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    Virgin Atlantic becomes the Yoko of the airline world!
     
  14. HeathrowGuy
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    I think the final deal will likely involve just the 49% stake, as there could be consequences with route authorities should VS no longer be deemed British.

    Sent while enjoying tasty kebab in a Turkish taxicab
     
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  15. Davescj
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    But does the UK have separate rules from the EU for ownership?
     
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  16. mtkeller
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    I think that was just for crew training, not because they needed the capacity. Given the time required to get to/from LHR (and CDG is no peach either), most London-Paris travellers will use EuroStar. Immigration is also much easier with EuroStar, since you do it prior to boarding and step off in London as if you arrived from York and not another country.
     
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  17. mtkeller
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    I think the issue is access to routes between the UK and countries with with the UK does not have open skies agreements. The British regulators might not be inclined to give an air carrier with majority control non-British (even if it's majority EU in compliance with EU ownership rules) route authority. I suspect that this concern is overstated, as long as the majority owners wouldn't be attempting to dismantle the airline. If the Virgin brand remains, operations are LHR/LGW-based, and aircraft are flying under British registration, I imagine that the regulators will see not giving BA a monopoly on route authorities as a positive.
     
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  18. jbcarioca
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    Yes, that is what it was, and it was formally announced as such. The filled up the planes with very, very, very cheap fares. Mrs jbc and I flew Business for Euro 89 RT. Many people, including us flew one way, stayed in the airport and flew back. IIRC almost everyone seated near us had done the same thing.

    My point actually was that the A380 could have a short range version a la B747 domestic Japan. In Japan also, trains are usually the better options, but they still fill up large aircraft too. Still, there seems always to be more LHR demand than there is supply. So, speculation reigns. You're obviously correct, at least for now. Sorry I was not more clear.
     
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  19. GenevaFlyer
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    Just one correction here, from inside sources ... the perennial losses are not with KL, but with AF. KL is actually a profitable business unit in the AF/KL portfolio.

    Cheers,

    GenevaFlyer
     
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  20. jbcarioca
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    Thanks for the correction. You are, of course, correct.

    If I believe the news reports the intra-Europe flights are the major problem, and those are mostly AF, so that is consistent with your insiders view. However, it also seems that LH AF performs better than LH KL, if I believe another insider. Insiders aside, I personally think both are quite seriously threatened by superior product offered by Middle East and East Asian carriers, coupled with some odd legacy fleet configurations and a lack of resources to adequately update their offerings, hence canceling/deferring some Airbus and Boeing orders. The losses to which I ineptly referred above were those of the intra-Europe feeders, not the LH. I hope they do better. I'm fond of both AF and KL, the latter because i do like my delft house collection, among other things.
     
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  21. From NYC
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  22. LETTERBOY
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  23. jbcarioca
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  24. jbcarioca
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    The previous quote suggests that Sir Richard might not sell, but would join DL and probably join SkyTeam too, although there was nothing said about the latter move.
     
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  25. William JLP

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