Delta Wants A Piece Of Virgin Atlantic
Looking in particular for increased access to London’s Heathrow Airport but in general embroidering the pattern of airlines expanding their international service, Delta is reportedly negotiating for Singapore Airlines’ 49% stake in Virgin Atlantic Airways.
Singapore Airlines today confirmed that it is talking with “interested parties” but did not identify whom they might be. Both Virgin and Delta refused comment. Dominic O’Connell broke the story in the U.K.’s Sunday Times.
Delta has been pursuing a stake in Virgin for more than two years, according to Reuters’ Soyoung Kim and Charmian Kok, “but previous talks broke down over price and other issues, and there is no guarantee that its recent discussions would result in a pact,” according to their sources. Delta also has been considering ways to partner with Air France-KLM, which could also take a stake in Virgin, one source tells them.
If the Singapore to Delta deal gets done, Air France-KLM, Delta’s partner in the SkyTeam Alliance, might then buy part of Sir Richard Branson’s remaining 51% stake in Virgin, sources tell Financial Times. “Non-European Union companies are not allowed to control EU airlines, but Delta’s partners would be permitted to invest, letting the alliance take a shared majority stake,” report Anousha Sakoui, Andrew Edgecliffe-Johnson and David Gelles.
“Branson has made no secret of his desire that Virgin should join one of the three big airline alliances to keep Virgin Atlantic competitive,” Simon Neville writes in The Guardian, and he recently hinted that a deal would happen in the next few months. “However, it is unclear whether he would be willing to relinquish his majority stake, which he has held since founding the airline,” Neville continues.
Virgin Atlantic, which is 28 years old, has 44 planes and flew 5.3 million passengers in 2011, according to The Guardian’s article. It also has six Airbus A380 aircraft on order. It is the No. 3 carrier at Heathrow, however, with 304 takeoffs and landings a week, according to the Wall Street Journal.
“Virgin has rather lost its way as the world consolidates and they really need to bite the bullet,” John Strickland, director of JLS Consulting in London, tells Bloomberg’s Matthew Campbell, Mathieu Rosemain and Mary Jane Credeur. “Signing up to SkyTeam would be part of it, I’m sure, and they could bring a rock solid basis to Delta’s trans-Atlantic alliance with Air France-KLM.”
Delta is the world's second-largest airline after United Continental.
“If Delta were to secure a stake in Virgin Atlantic, it would give the U.S. airline one of the most robust global networks,” write the Wall Street Journal’s Marietta Cauchi, Dana Cimilluca and Daniel Michaels. “It would also be a major coup against United and Delta's other main rival, AMR Corp.'s American Airlines. AMR, which is nearing an exit from bankruptcy, is in merger talks with US Airways Group that could create the world's biggest airline.”
A deal would be “Delta’s most significant strategic move since its merger with Northwest Airlines, which made it the biggest American carrier until the union of United Airlines and Continental Airlines last year” Jad Mouawad and Michael de la Merced point out in the New York Times. “Delta has shown time and time again that it is extremely opportunistic,” airline expert Brett Snyder tells them. “If it sees a good opportunity, nothing is off the table.”
Charisse Jones, meanwhile, has a timely article in USA Today this morning about U.S.-based airlines expanding their international presence even as they contract service domestically.
“They're spending millions to upgrade international terminals, filling their fleets with jets better able to make long-distance trips, and adding bed-like seats and other perks to make a flight across time zones as comfortable as possible,” Jones writes.
"The airlines are focusing on where they can make money," Brett Snyder, founder of the travel-assistance website and blog The Cranky Flier, tells Jones.
"A lot of it is driven by where we see the opportunity," according to Chuck Schubert, VP, network planning for American Airlines. He projects that American “will increase its international service from roughly 28% to 45% of its flights in coming years.”
The International Air Transport Association, meanwhile, forecasts that passengers traveling within the U.S. will grow 2.6% a year from 2012 to 2016, while international fliers will increase 4.3% annually during the same period.
Unless they do something about those increasingly cramped seats, however, that also represents a hefty increase in leg cramps and neck cricks for the average passenger.