Delta Takes 49% Stake in Virgin for $360 Million

By Paul Riegler on 11 December 2012
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Delta Air Lines is acquiring a 49% stake in Virgin Atlantic Airways for $360 million in a deal that will give the U.S. carrier a far greater presence at London’s Heathrow Airport.

Delta, the number two U.S. carrier by traffic, purchased the stake from Singapore Airlines, which has been looking to sell its interest in the airline for the past few years.  Singapore paid £600 million ($964.5 million) for it in 1999.

The deal gives passengers additional connection opportunities with Virgin in London as well as access to the short-haul domestic routes the carrier announced earlier this week. Passengers will get reciprocal frequent flyer benefits and access to both the Delta Sky Club and the Virgin Atlantic Clubhouse.

Delta and Virgin will operate a fully-integrated joint venture in which both airlines will share the costs and revenues from all joint-venture flights.  The joint venture will offer a total of 31 round-trip flights between the United Kingdom and North America with a total of nine daily round-trip flights from Heathrow to JFK and Newark Liberty.

Under the terms of the agreement, Richard Branson’s Virgin Group will retain a controlling 51% stake and the carrier will continue to operate as Virgin Atlantic with its own operating certificate.  Virgin is the third-largest airline at Heathrow.

Delta, which carries more traffic on routes to Europe and Asia than any other U.S. airline, is behind both American Airlines and United Airlines on services to Heathrow.  British Airways controls roughly 50% of the slots at Heathrow and operates a joint venture with American Airlines on flights to and from the U.S.

The two airlines must file an application with the U.S. Department of Transportation for antitrust immunity for the joint venture and the transaction will require review by the U.S. Department of Justice and European Union regulators.  The transaction is expected to close and the joint venture is expected to be implemented by the end of 2013.


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