If they succeed at buying the 49 per cent stake held in Virgin Atlantic Airways by Singapore Airlines Ltd, Delta Airlines will see an expansion of its operations at London’s Heathrow Airport, Europe’s busiest airport.
According to the two people familiar with the matter, there are on-going talks between Delta Airlines and Singapore Airlines. A stake sale could allow Virgin form a trans-Atlantic venture with Delta and partner Air France-KLM Group in the SkyTeam alliance, which would provide access to landing and take-off slots at the Heathrow base of the U.K. carrier.
“Delta does not have that many flights to Heathrow, and Virgin would get more access to airports in New York and Los Angeles,” an analyst said. “In terms of having a presence at Heathrow, it is the only way for Delta.”
With just 5 per cent of slots at Heathrow, the SkyTeam alliance of Delta, Air France-KLM and other partners is the smallest alliance group at the airport. Oneworld, led by British Airways and AMR Corp’s American Airlines dominates with almost half of the service, followed by United Continental Holdings Inc and its Star Alliance with about a quarter of the slots.
People familiar with the matter who asked not to be identified have indicated that Delta is discussing buying all or part of the Singapore Airlines stake. Paris-based Air France-KLM, Europe’s largest carrier, might also purchase stock, they said.
The Virgin stake cost Singapore Airlines 600.3 million pounds in 1999, or about $961million today. Delta may pay $1.1 to $1.3 billion for it , CNBC reported, citing sources it didn’t identify.
A Virgin Atlantic deal would be Delta’s third with a foreign carrier in recent years. Atlanta-based Delta agreed to buy 3 per cent of Brazil’s Gol Linhas Aereas Inteligentes SA for $100million in 2011, and completed a $65million investment in Grupo Aeromexico SAB this year after a regulatory review. Both investments gave Delta a board seat.
It is very likely that a deal between Delta and Virgin Atlantic would receive regulatory approval due to the fact that competing groups are already much bigger. European Union rules require the zone’s airlines to be under European control.
Spokespersons for Delta, Virgin and Air France-KLM declined to comment. Singapore Airlines said in a statement that “negotiations with interested parties may not result in a transaction”.