Delta’s Talks Over Virgin Stake Raise Questions About Branson’s Holdings

Delta’s Talks Over Virgin Stake Raise Questions About Branson’s Holdings

As Delta Air Lines holds talks to buy some or all of Singapore Airlines’ 49 percent stake in Virgin Atlantic Airways, one question has arisen.

What will happen to the holdings of Richard Branson, the loquacious British entrepreneur who founded Virgin Atlantic 28 years ago?

For now, perhaps nothing. Virgin’s outgoing chief executive, Steve Ridgway, told Bloomberg News on Monday that Mr. Branson would “probably remain in control” of the airline. “He is the majority shareholder,” Mr. Ridgway told the news service.

But it’s unclear whether that will remain the case down the road. Virgin is struggling with high oil prices and tougher competition on core routes like those in the North Atlantic. It reported a loss of £80 million, or $ 128 million, in the year that ended in February, swinging from a profit of £18.5 million in the previous year.

One of Virgin’s issues is its status outside one of the three major alliances in the airline industry, which allow companies to share routes and cut costs. (For instance, a longtime rival, British Airways, belongs to Oneworld, letting it share routes with American Airlines.)

Delta belongs to SkyTeam, another of the major alliances, and the airline hopes to use a newly forged partnership with Virgin to bolster the number of trans-Atlantic flights that it can offer. It currently has only a small fraction of overall slots at Heathrow airport in London, badly trailing both American and United Airlines, the latter of which is a member of Star Alliance.

Buying Singapore Airlines’ 49 percent stake would certainly help Delta in its quest to bolster its international offerings. But Singapore has fumed that its 49 percent stake in the British airline gave it relatively little say in how the company was operated.

That’s where Delta’s main partner in SkyTeam, Air France-KLM, could come in. European Union regulations would cap the American airline’s stake at 49 percent. But news reports have said that Air France-KLM may be willing to buy an additional 5 percent to 10 percent stake in Virgin.

Leaving aside whether European Union regulators would allow such an ownership structure, that situation still requires Mr. Branson to give up his 51 percent stake. The entrepreneur has never held less than that, though early on in the airline’s history his original business partner, Randolph Fields, held a 25 percent stake.

Mr. Branson bought him out, and held on to control until selling the 49 percent stake to Singapore Airlines in 1999 for £600.3 million.

A reduction in Mr. Branson’s holdings appeared possible not that long ago. He had hired Deutsche Bank in 2010 to consider possible options for Virgin. And earlier this year, Mr. Ridgway told The Financial Times that his boss was “prepared to relinquish his status as controlling shareholder.”

Has Mr. Branson since changed his mind, as Mr. Ridgway appears to have said? It’s unclear.

A representative for Virgin based in the United States didn’t have a comment on the matter.


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