* Singapore Airlines says in talks to sell its 49 pct stake
* Delta keen on Virgin's slots at London's Heathrow-sources
* Delta could team up with Air France-KLM - source
* Virgin Group keen to keep control, work with Delta-source
By Rhys Jones and Charmian Kok
LONDON/SINGAPORE, Dec 3 Singapore Airlines
is in talks to sell its 49 percent stake in British
carrier Virgin Atlantic, with sources saying Delta Air Lines
is among the suitors keen to access Virgin's lucrative
slots at London's Heathrow airport.
Richard Branson's Virgin Group wants to keep its 51 percent
stake in Virgin Atlantic and work with Delta if the U.S. carrier
pulls off a deal, a source familiar with Branson's thinking
added on Monday.
Singapore Airlines said in a brief statement it was in talks
with interested parties but did not name them. It also cautioned
the discussions might not result in a deal.
Airlines like Delta have long hoped to break into London's
capacity-constrained Heathrow airport, a lucrative hub for
corporate passengers where landing slots are generally hard to
acquire. Virgin Atlantic is the second-largest carrier at
Heathrow after IAG's British Airways.
Delta has been considering ways to partner with Air
France-KLM, which could also take a stake in Virgin
Atlantic, one person familiar with the matter said.
The European Union requires that EU carriers be under
European control, meaning Delta would need an EU airline as a
partner if it wanted majority control of Virgin Atlantic.
If Air France-KLM were to buy a small percentage of
Branson's stake, then Virgin Atlantic could continue to be
European controlled. However, the source close to Branson
signalled the British entrepreneur was not looking to sell.
"As far as he (Branson) is concerned, it is just Singapore
Airlines' 49 percent stake that is up for sale - he is keen to
maintain control of Virgin Atlantic and form a stronger
airline," the source said, adding Branson supported a deal with
Delta because it would make Virgin Atlantic stronger on routes
between Britain and the United States.
Delta, the second-largest U.S. airline by revenue after
United Continental, has been looking to acquire a stake
in Virgin Atlantic for more than two years but previous talks
broke down over price and other issues, and there is no
guarantee that its recent discussions would result in a pact,
two people familiar with the matter said.
"London obviously is the premier market and Heathrow is by
and large the market leader. It's the lynchpin transatlantic
market in terms of size and revenue, particularly premium
traffic revenue," said George Hamlin, an aviation consultant in
A deal with Delta would also give Virgin Atlantic access to
hundreds of markets on a one-stop connecting basis in the United
States, he added.
Delta and Air France-KLM declined to comment.
"We are always talking to many airlines on a number of
different matters but we never comment on the details of these
discussions," a Virgin Atlantic spokeswoman said.
If Delta succeeds with its bid, Virgin Atlantic, which is
not a member of a global airline alliance, would almost
certainly join Delta and Air France's SkyTeam, the source close
to Branson said. SkyTeam trails its oneworld and Star Alliance
counterparts in slot access at Heathrow.
"Delta now finds itself going up against the combination of
American Airlines and British Airways," said Hamlin, referring
to the two anchor members of the oneworld global alliance.
"British Airways brings along a feed from other destinations
- both Europe and intercontinental - at Heathrow. Delta is
basically a dead-end at this point."
VIRGIN SALE OPTION
Singapore Airlines (SIA) bought 49 percent of Virgin
Atlantic for 600 million pounds ($962 million) in 1999, but has
been open to selling its stake since at least mid-2011 when a
price of $500-$600 million was mooted in markets, a banking
source familiar with the talks said at the time.
At the same time, SIA has been refocusing on its key markets
where it is under pressure from low-cost airlines, launching its
own budget carrier, Scoot, and bolstering its Asian regional
Virgin Atlantic, like other European carriers, has been
battered by rising fuel prices and the euro zone crisis, and
posted a loss of around 80 million pounds in its last full year.
"If Virgin is valued on an earnings basis, then it's hard to
see SIA getting a good price. On the other hand, SIA is not
desperate for cash and they probably won't sell it at a fire
sale price," said Andrew Orchard, a regional airlines analyst at
Branson, who set up Virgin Atlantic in 1984, has been
weighing the airline's future for years and two years ago
appointed Deutsche Bank to examine offers.
Virgin Group - made up of more than 400 companies worldwide
- has a track record of selling down its stakes in businesses,
while retaining a minority interest.
Last year Virgin Group sold a 51 percent stake in its
fitness chain Virgin Active to private equity group CVC Capital
Partners for $700 million and did a $560 million deal with U.S.
investor Wilbur Ross for a 45 percent stake in Virgin Money.
Branson has also reduced his initial 49 percent stake in
Virgin Australia Airlines to 26 percent in recent years.
Virgin Atlantic lost out in the battle to take over smaller
UK carrier bmi last year to IAG, giving the owner of British
Airways and Iberia more than 50 percent of Heathrow's slots.
Virgin has since won the rights to the remaining slots that
IAG was forced to give up after the bmi deal was cleared.