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Delta looks to land Virgin Atlantic share

  • Article by: KARI LUNDGREN
  • Bloomberg News
  • December 4, 2012 - 8:39 PM

ATLANTA - Delta Air Lines' interest in buying a stake in Virgin Atlantic would position the U.S. carrier to grab more of the world's most lucrative market for premium passengers.

Talks are underway for Delta to acquire Singapore Airlines' 49 percent of Virgin Atlantic, two people familiar with the matter said. An agreement could let Virgin form a transatlantic venture with Delta and SkyTeam alliance partner Air France-KLM Group to serve London's Heathrow airport.

North Atlantic flights generate roughly a quarter of all global revenue from first- and business-class fares, more than twice as much as the second-place Pacific routes, according to the International Air Transport Association. Heathrow is closer to London than Delta's previous base at Gatwick airport, which U.S. airlines have shunned since flight rules eased in 2008.

"Delta doesn't have that many flights to Heathrow, and Virgin would get more access" to airports in New York and Los Angeles via Delta, said Jeff Straebler, an analyst with John Hancock Financial Services in Boston. "In terms of having a presence at Heathrow, it's the only way for Delta."

Richard Branson, Virgin's founder and owner of a 51 percent stake, touched off industry speculation about a Heathrow land grab after hiring Deutsche Bank to assess options in 2010. The London airport finished 2011 as Europe's busiest and No. 3 in the world, behind Atlanta's Hartsfield and Beijing.

Singapore Airlines said Monday that negotiations with "interested parties" may not result in a transaction. Spokesmen for Atlanta-based Delta, Virgin and Air France-KLM declined to comment about any talks on the sale of the stake.

For Branson, joining an airline marketing group would break with his history. While British Airways and other rivals grew with mergers and alliances, the 62-year-old billionaire sought to lure high-fare fliers to Crawley, England-based Virgin with amenities such as a cheese trolley and Lanson Black Label Champagne.

"Virgin desperately needs something like this," said Jay Sorensen, who formed an agreement to share booking codes with Virgin when he worked at Midwest Express in the early 2000s. "They would benefit from Delta's discipline and strategic direction."

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