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Branson Says Virgin Atlantic Has Options In Quest  
User currently offlineTeamInTheSky From United States of America, joined Apr 2011, 531 posts, RR: 0
Posted (2 years 10 months 4 weeks 1 day 5 hours ago) and read 10199 times:

http://www.bloomberg.com/news/2011-0...hoice-of-allies-as-deal-nears.html

Quoting article:
Richard Branson said he’s in talks with as many as three potential suitors for Virgin Atlantic Airways Ltd. and that he’s likely to reach a decision on a partnership sometime in the next quarter.

“Discussions with two or three parties are progressing,” Branson said last night in an interview in Chicago. “Within the next two or three months we should be clear on whether there’s an alliance we’re happy with or not.”

Branson, 60, has hired Deutsche Bank AG to assess Virgin Atlantic’s strategic options as rivals British Airways and American Airlines boost cooperation on key trans-Atlantic routes. The entrepreneur, who founded the U.K. carrier in 1984, said that while joining an alliance is essential, it’s not yet clear whether he will sell down his 51 percent stake.

The fate of a 49 percent stake in Virgin Atlantic held by Singapore Airlines Ltd. (SIA), which could determine control of the company, will probably turn on the choice of alliance, Branson said. Singapore Air is a member of the Star Alliance, alongside Deutsche Lufthansa AG (LHA), United Continental Holdings Inc. (UAL) and BMI, the No. 2 slot-holder at London’s Heathrow airport after BA.


If you read the full article, it sounds like Branson might hold an auction of sorts for some influence or shares. I was also surprised to see that Branson isn't sure if SQ is going to offload their shares. It should be an interesting couple of months to see what happens. I still think that they will eventually join Star, but my hope is Skyteam.


Since 2010: DL, KL, AF, WX, IG, FR , FL, U2, AK, BA, OK, UX, VS, VN, K6
17 replies: All unread, jump to last
 
User currently offlineRichard28 From United Kingdom, joined Aug 2003, 1595 posts, RR: 6
Reply 1, posted (2 years 10 months 4 weeks 1 day 4 hours ago) and read 9952 times:

my thoughts are that three things could happen:

1) a non alliance gulf carrier, i.e. EY or QR are looking to buy into VS, however this would require a purchase of SQ's stock, so there may be some haggling over price

2) SkyTeam looking to get VS, again would probably require a sale of SQ's stock, so more haggling over price

3) Star looking to get VS, which would probably be via LH, who could use integration with BMI to massively reduce UK costs, and drive up UK market share, this could mean SQ staying involved in the short term, but with Branson selling some of his shares to LH.

I think the Skyteam option is the weakest proposition out of the three, owing to the very close hubs of CDG and AMS.

EY or QR would be very interesting, and would help these carriers differentitate their market/product from EK.

Star is the easiest fit, owing to BMI and slot availability, and potential cost synergies...


User currently offlineTeamInTheSky From United States of America, joined Apr 2011, 531 posts, RR: 0
Reply 2, posted (2 years 10 months 4 weeks 1 day 4 hours ago) and read 9830 times:

Quoting Richard28 (Reply 1):
Star is the easiest fit, owing to BMI and slot availability, and potential cost synergies...

I completely agree. Do you think there would be any regulatory hurdles though?

Quoting Richard28 (Reply 1):
I think the Skyteam option is the weakest proposition out of the three, owing to the very close hubs of CDG and AMS.

I don't think the location of the hubs makes it necessarily the weakest option. Both DL and AF have made no bones about the opportunity to create more synergy at LHR and get more slots is a huge goal of theirs.

If it comes to an actually bid (or something of the sort) I think that Ethiad or Qatar will probably try their best to win it, if they are interested.



Since 2010: DL, KL, AF, WX, IG, FR , FL, U2, AK, BA, OK, UX, VS, VN, K6
User currently offlinekiwiandrew From New Zealand, joined Jun 2005, 8492 posts, RR: 14
Reply 3, posted (2 years 10 months 4 weeks 1 day 3 hours ago) and read 9800 times:
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Quoting TeamInTheSky (Reply 2):
I completely agree. Do you think there would be any regulatory hurdles though?

Why would there be , there is no overlap at all in their networks.



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User currently offlineual777uk From United Kingdom, joined Nov 2005, 3356 posts, RR: 1
Reply 4, posted (2 years 10 months 4 weeks 1 day 3 hours ago) and read 9711 times:

Quoting kiwiandrew (Reply 3):
Why would there be , there is no overlap at all in their networks.

I cannot see many issues save for the fact that I am sure BA would probably try and get in on the party somehow, wanting more slots or something like that.

As for VS joinging Star, would UA welcome that? I am not so sure.

Interesting times ahead for VS.


User currently offlineTeamInTheSky From United States of America, joined Apr 2011, 531 posts, RR: 0
Reply 5, posted (2 years 10 months 4 weeks 1 day 3 hours ago) and read 9687 times:

Quoting kiwiandrew (Reply 3):
Why would there be , there is no overlap at all in their networks.

I have only been living in the UK now for about 8 months, but it seems like there is always some board or group trying to oversee any type of acquisition or new alliance with any industry. If they joined LH/BMI and created some sort of JV, I just wondered if there would be any hurdles they would have to jump to get it passed.



Since 2010: DL, KL, AF, WX, IG, FR , FL, U2, AK, BA, OK, UX, VS, VN, K6
User currently offlineRichard28 From United Kingdom, joined Aug 2003, 1595 posts, RR: 6
Reply 6, posted (2 years 10 months 4 weeks 1 day 3 hours ago) and read 9667 times:

Quoting ual777uk (Reply 4):
I cannot see many issues save for the fact that I am sure BA would probably try and get in on the party somehow, wanting more slots or something like that.

I doubt this would happen. With BA/AA it was a different story, as their market share was so massive

I very much doubt any slot give up would be required on VS joining an alliance or commencing a revenue sharing deal with any US partner.


User currently offlineRichard28 From United Kingdom, joined Aug 2003, 1595 posts, RR: 6
Reply 7, posted (2 years 10 months 4 weeks 1 day 3 hours ago) and read 9628 times:

Quoting ual777uk (Reply 4):
As for VS joinging Star, would UA welcome that? I am not so sure.

If it was a revenue sharing venture on US/UK routes it could be very attractive to UA (or DL for that matter!)... this is probably where most of the negotiation is.


User currently offlineual777uk From United Kingdom, joined Nov 2005, 3356 posts, RR: 1
Reply 8, posted (2 years 10 months 4 weeks 1 day 3 hours ago) and read 9607 times:

Quoting Richard28 (Reply 6):
I very much doubt any slot give up would be required on VS joining an alliance or commencing a revenue sharing deal with any US partner.

I think you are right but would BA just sit and say nothing, i just cannot see that happening.


User currently offlineRichard28 From United Kingdom, joined Aug 2003, 1595 posts, RR: 6
Reply 9, posted (2 years 10 months 4 weeks 1 day 3 hours ago) and read 9560 times:

Quoting ual777uk (Reply 8):
I think you are right but would BA just sit and say nothing, i just cannot see that happening.

You're right, I'm sure BA would have something to say on the matter, but with the number of slots in VS & UA's posession far out-weighed by the combination of BA & AA slots at LHR, I very much doubt any restrictions would be put in place on such a venture.

[Edited 2011-05-27 03:41:10]

User currently offlinecommavia From United States of America, joined Apr 2005, 11121 posts, RR: 62
Reply 10, posted (2 years 10 months 4 weeks 1 day 2 hours ago) and read 9354 times:

Well he's right about one thing: I don't doubt that either Star or SkyTeam would love to have him - he will have no problem getting interest from either of them if he wants to be part of either grouping.

The real question, to me, though, is whether or not he will be able to maintain control (or influence) as he so steadfastly insists he will do. I could see a potential suitor wanting to actually take over the company, no doubt to get their hands on Virgin's Heathrow slot portfolio.

Should be interesting to watch.


User currently offlineRichard28 From United Kingdom, joined Aug 2003, 1595 posts, RR: 6
Reply 11, posted (2 years 10 months 4 weeks 1 day 1 hour ago) and read 9225 times:

Quoting commavia (Reply 10):
The real question, to me, though, is whether or not he will be able to maintain control (or influence) as he so steadfastly insists he will do.

If Sir Richard Branson sells any more shares, then he will lose control, however if he ties the airline into a branding agreement with the Virgin group, complete with royalty payments, whilst maintaining a minority shareholding, then he will retain some influence.

Remember that he operates on a similar basis with Virgin Australia and Virgin America.

Quoting commavia (Reply 10):
I could see a potential suitor wanting to actually take over the company, no doubt to get their hands on Virgin's Heathrow slot portfolio.

Slots are important, and very valuable, but I just could not see him agreeing for the company to be sold, to strip the assets and to relinquish these slots to another carrier. It does not fit in with his way of doing things, and would undoubtably damage the Virgin brand in the UK, which, I think, he holds very dear.

Any deal will be, IMHO, calculated to be for the long term success of the airline, either as a merged company, part of an Alliance, a new Joint venture or any combination thereof.


User currently offlineSonomaFlyer From United States of America, joined exactly 4 years ago today! , 1558 posts, RR: 0
Reply 12, posted (2 years 10 months 4 weeks 16 hours ago) and read 6753 times:
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Quoting ual777uk (Reply 4):
As for VS joinging Star, would UA welcome that? I am not so sure.

Why wouldn't UA welcome the alliance? CO and VS already have (or had) code sharing operations for both carriers. I'd see VS as a good compliment to boost market share for Star Alliance out of lots of key markets. UA would have access to additional non stop markets out of the US and UA would boost capacity on the West Coast where they are battling AA and BA in the TATL market. Add LH in to the mix the benefits grow even more.

Given BA and AA's alliance, its unlikely regulators would force the parties to drop slots.

The only other option to me that seems viable would be an alliance with a Gulf based carrier but I'm not sure Emirates really needs it and the others don't necessarily add enough in the way of traffic or other synergies. If this is simply a case of cash infusion/buyout of SIA then perhaps.


User currently offlinejfk777 From United States of America, joined Aug 2006, 8091 posts, RR: 7
Reply 13, posted (2 years 10 months 4 weeks 15 hours ago) and read 6038 times:
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Quoting ual777uk (Reply 4):
I cannot see many issues save for the fact that I am sure BA would probably try and get in on the party somehow, wanting more slots or something like that.

As for VS joinging Star, would UA welcome that? I am not so sure.

UA would welcome Virgin Atlantic because UA is now run by Continental's management and CAL bought with them to United a code-sharing deal with Virgin Atlantic. VA is a huge gain for Star and SIA would welcome it too because VA stay in its family and allow SIA to monetize its 49% in VA.


User currently offlineBraniff727Ultra From United States of America, joined Jul 2010, 109 posts, RR: 0
Reply 14, posted (2 years 10 months 4 weeks 9 hours ago) and read 4853 times:

Just my humble thoughts on this here but I can see UA & Star Alliance welcoming VS into the fold with LH/BMI as the suitor of choice when it all shakes out. LH would gain even more slots at LHR & they could then tie VS & BMI together for long haul service. This would also strengthen Virgin America's position in key U.S. markets outside of California that are served by VS.

Sir Richard is VERY concerned about making sure that the Virgin brand is well served with this decision as he will be focused on Virgin Galactic & the oceanic venture that Virgin is pushing for the forseeable future.


User currently offlinelhrnue From United Kingdom, joined Jun 2010, 140 posts, RR: 0
Reply 15, posted (2 years 10 months 4 weeks 6 hours ago) and read 4204 times:

Come on Star, create a proper competition at LHR with VS, BMI, UA, SQ and LH against Oneworld. Join your forces and get BAA to achieve 30min transfer time within the new T2. Just learn from your colleagues in Munich how to do it.

User currently offlineLHRFlyer From United Kingdom, joined Apr 2010, 800 posts, RR: 1
Reply 16, posted (2 years 10 months 3 weeks 5 days 13 hours ago) and read 3204 times:

Whilst there is a superficial attraction to either Star or SkyTeam doing a deal with Virgin, I'm not so confident that a deal could be easily done.

SRB is clearly looking to divest his stake (hence the appointment of Deutsche Bank), and any deal has to overcome the following issues:

a) SQ's stake. They've made it clear for years that they want out (but not at any price) and they haven't been any willing buyers. Also, SQ's dissatisfaction with its investment in VS will be a warning sign for any potential buyer.

b) Licensing of the Virgin brand. The Virgin brand may be a strong brand, but the experience of easyJet and Virgin Blue/V Australia shows that operating a brand under licence can be fraught with problems. There is a cost to licensing the brand and there are the constraints that come with the brand licence which can severely limit how you can market/extend your business. If you are an existing, established, airline brand, you have to ask where is the logic in acquiring another brand under licence.

c) And then there is the deal price and other commercial terms.

A tie-up between LH, BD and VS has been on the cards for a good couple of years (and VS sought to court LH in a very public way) and nothing has come of it so far. BD is a real headache for LH with significant operational losses. I'm not sure the way out of this is to buy a stake in another airline that was in its last financial year heavily loss making. Merging BD and VS into sustainable profitable businesses is something I'm not sure LH has the stomach for. I would not be surprised if LH seeks to dispose of BD (even to IAG for the right price). LH has got some value out of BD by extracting slots for the rest of its group, and it may decide that is enough. Also, the soundings from current LH management are that they have made enough acquisitions for now.

As I say, although LHR is a lucrative slot constrained market, once you get beyond the superficial attractions of a tie-up with a name like Virgin and start looking into the detail of how a deal would work, I'm not sure its the straightforward "no brainer" of a deal it is made out to be.

[Edited 2011-05-29 16:49:48]

[Edited 2011-05-29 16:58:28]

User currently offlinecloudboy From United States of America, joined Jan 2004, 793 posts, RR: 0
Reply 17, posted (2 years 10 months 3 weeks 3 days 11 hours ago) and read 2384 times:

I think that anything at this point is going to be far more political and marketplace position driven than business logical. I think most airlines at this point see a fairly dark future ahead, with steadily rising fuel costs and already having cut costs back as much as they can. Taking Virgin Atlantic into their alliance fold is as much about denying other alliances capacity and slots as it is a gain for them. I also think that we are getting to a point where airlines have become too big, and investors are starting to see that there are some significant risks by having everything under one airline brand.

For Sky Team, I think that the major interest will be in slots and more international connections. This will actually allow Delta to pull back some of it's transatlantic routes while still being able to offer the same ticket to the consumer. But mostly I see them doing it just to deny Star Alliance dominance in Europe.

For Star Alliance, I see them gaining more direct flights into Heathrow, as well as now offering a true premium economy product. This is just plain market share. I think the Continental/United merger is not going as smoothly as they let on, and this might just give them a fall-back option without letting Lufthansa become the dominant player.

For One world, I actually see a pretty interesting idea -OneWorld is very heavily geared towards the high-profile flyer. The problem is they see they are loosing lots of passengers to Star and Sky, but are unwilling to compromise their brands on meeting them head to head. With JetBlue no more closely tied with American, I could see a double-tier market approach - British/American for the high-paying business flyer, while position JetBlue and Virgin as the discount option.



"Six becoming three doesn't create more Americans that want to fly." -Adam Pilarski
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