Singapore Airlines in discussion to sell Virgin stake to Delta

Courtesy Virgin Atlantic

Courtesy Virgin Atlantic

IT looks like the ideal marketing situation, where there is a willing seller and there is just as willing a buyer. Singapore Airlines (SIA) may have found a buyer for its 49-per-cent stake in Virgin Atlantic which it acquired in 1999 for GPB600 million (US$963 million). The Singapore flag carrier admitted to talking to interested parties, and the rumour mill had it that the potential buyer is US-based Delta Airlines.

deltaDelta has expressed interest in buying into Virgin to increase access to London Heathrow. The Virgin stake would serve Delta better than SIA, whose acquisition came at a time when the airline was pushing for rights to fly trans-Atlantic from Europe to the US east coast. Somehow the Virgin stake did not live up to expectation, and SIA has long expressed its intention to divest its interest even as it has bought a 10-per cent stake in Virgin Australia. (See Singapore Airlines’ interest in Virgin Australia: Expedience or strategy? Nov 7, 2012)

However, Australia is quite a different story. SIA faces stiff competition from the Qantas-Emirates partnership, and Virgin Atlantic will help boost its reach across Australia and possibly beyond as the Australian carrier expands. Shifting its focus to Asia and the Pacific region is probably more imperative for SIA now than working with Virgin Atlantic in Europe.  Interestingly, Virgin Australia already has a commercial arrangement with Delta.

Virgin founder Richard Branson who holds the majority 51-per cent stake in the London-based carrier has said that Virgin should consider alliances to grow, particularly now in light of the British Airways-American Airlines deal. This is an about-turn for the billionaire entrepreneur who used to consider such blocs as being “anti-competitive”. He said: “We realised for the long-term stability of Virgin Atlantic we needed to look at an alliance partner.” The market rumour had it that Virgin is likely to join Star Alliance, but note that Delta is a member of Sky Team which also includes Air France and KLM.

siaAs for SIA, Delta’s interest in the Virgin stake must have come as a godsend after all those years of waiting. The question now is how much profit does it stand to garner from the deal?

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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