On 3rd of December, Singapore Airlines informed that it was in talks with several companies which were interested in an acquisition of its 49 percent stake in Virgin Atlantic Airways. According to sources familiar with the situation, among those interested parties is Delta Air Lines which seeks ways to reinforce its international operations.
Delta’s appetite for Virgin
In a brief statement released on the 3rd of December Singapore Airlines confirmed that it was in talks with several companies interested in the acquisition of its stake in Virgin Atlantic Airways, yet it did not disclosed them. In addition, Singapore Airlines underlined that all of these negotiations might not lead to a deal.
As it was stated by the source, Delta Air Lines was one of those third companies keenly interested in the acquisition of the Singapore Airlines stake in Virgin Atlantic Airways. Delta Air Lines is particularly interested in gaining access to Virgin Atlantic Airways slots at Heathrow Airport.
It is worth underlying that it is not the first attempt of the US carrier to acquire a Virgin stake as more than two years ago Delta was in talks regarding the acquisition, yet the negotiations were aborted over price and other matters as well. In addition, the current talks might not lead to the acquisition, according to sources.
Even though negotiations are ongoing, everything indicates that a deal will not be announced in the near future. According to the European Union law, EU carriers must be under European control. Therefore Delta Air Lines would have to cooperate with an EU airline as a partner if it desired to acquire majority stake in Virgin Atlantic Airways. As it was stated by the source, the US carrier had been considering ways to cooperate with Air France-KLM. The French carrier is also said to be interested in the acquisition of the stake in Virgin Atlantic Airways.
The acquisition of the Singapore Airlines stake in Virgin Atlantic Airways would be considered the most substantial deal since its merger with Northwest Airlines. Analysts underline that the acquisition of the stake would provide Delta Air Lines access to Heathrow Airport, which is one of the world’s busiest, not to mention that it would also significantly expand the US carrier’s operations. Company’s top officials have already confirmed that the US carrier is interested particularly in the expansion at Heathrow as the London’s airport is a profitable hub for corporate passengers. Virgin Atlantic Airways is currently the second-largest carrier at Heathrow just behind British Airways after it gained access to slots at Heathrow Airport in November, 2012.
Moreover the acquisition of the Singapore Airlines stake in Virgin Atlantic Airways by Delta Air Lines would reinforce the cooperation between the US carrier and Air France-KLM, which is the Europe’s largest airline.
Consolidation in air industry
The acquisition of the stake in Virgin Atlantic Airways would be the latest in the string of recent mergers in the airline industry. Carries have been more interested in consolidation as it is believed to be a way to restore profitability. Consolidation is thought to be an answer for all gripes of the air industry which has been facing growing oil prices. Therefore many carries have been struggling due to unfavorable economic conditions while the economic outlook remains still uncertain.
The expansion of Delta Air Lines is aimed at gaining access to new routes and markets which will ensure profitability.