Delta Buys large stake of Virgin Atlantic

Today December 11, 2012 a major announcement after weeks of speculation has been swirling in the airline industry. Delta is to purchase 49% of Virgin Atlantic.

This is a good thing but also a not so good thing. Sure we all like to make business deals looking for growth with our business and partnerships are forged by two main reasons. With all due respect to Virgin Atlantic founder he is without a doubt one of the most creative, honest, respectful human beings in the industry. From early days of Virgin records to the inauguration of his airline he has, and so has his airline come a very long way. However hostile takeovers come at you very quickly in the industry and take a look at history.

Moving forward Delta is the one who gains tenfold out of this pending deal prior to mergers and monopolies commission. Other authorities also have to give the green light. As an adviser in the aviation industry and in media we will be watching this as years unfold. Since deregulation in the 1980’s we knew it would be the demise of many airlines and major “MEGA” airlines would grow by takeover and more takeovers.

Virgin Atlantic who’s previous business partner was Singapore Airlines that made the initial partnership with Virgin Atlantic in 1999. That has since dissolved and in 2010 Virgin Atlantic struggled with losses. From that year forward they have been looking at other joint partnerships. Founder of the airline Sir Richard Branson started the airline in 1984 with one used Boeing 747. During that time his main competitor who was looking at was Laker Airways owned by Freddie Laker. Laker Airways had a unique brand called the “Skytrain” that would fly between London and New York with McDonald Douglas DC-10’s.

There is one airline that would love nothing better than Virgin Atlantic to dissolve is British Airways. Accusations by Chief Executive Willie Walsh of British Airways told a UK paper that Delta would want to dissolve the Virgin brand once it took over. This is not the first time fighting words between British Airways and Virgin Atlantic have occurred with Virgin being the more subtle and respectful airline between the two’s exchanges

Delta Airlines is lagging with its ability to serve London’s Heathrow behind, United Airlines, British Airways, American Airlines for which American and British have an alliance with each other. Delta over the years has grown to a monumental size where by it has become a goliath. At New York’s JFK it is remodeling the international terminal at a price of $1.2 Billion where they will share with Virgin Atlantic. In Ft Lauderdale, Florida Delta has the terminal 2 with the exception of Air Canada with a few flights a day all to itself. With this being said there is a trend when airlines become so large. Virgin Atlantic says it will retain 51%  of the company. Last but not least there is a one thing that they say will not be affected by the deal and that is Virgin America

Source Airline Adviser 12/11/12