Chris Jasper/LONDON
Singapore Airlines (SIA) and Virgin Atlantic are hammering out the details of their recently agreed deal. Under it, the Asian giant takes a 49% stake in the UK holding company, which owns Virgin Atlantic Airways, Virgin Holidays, Virgin Sun and cargo operation Virgin Aviation Services.
The £600 million ($975 million) deal values Virgin Atlantic at £1.225 billion and includes a cash injection of £49 million for the UK carrier, with chairman Richard Branson reinvesting a further £51 million. Talks are under way on the fine print of the agreement, which will allow the carriers to pursue long-held route ambitions.
Anticipated codeshares should give Virgin access to Australasia and South-East Asia, with SIA gaining access to the USA via Virgin's North Atlantic routes. Virgin, it is claimed, will not join the Star Alliance, even though SIA becomes a full member this year. The future of Virgin codeshares with Air India, Continental Airlines and Malaysia Airlines is inevitably in doubt, although one with British Midland - to be partially acquired by Star leader Lufthansa - could survive.
The deal - for now, a memorandum of understanding - represents SIA's first acquisition of a major airline shareholding. Branson plans to take a small reciprocal private stake in SIA to cement the deal. He insists there is no cashflow problem at Virgin, and that the airline will turn a profit this year, despite tough market conditions. Branson says Virgin's value should grow to £2 billion "in the next few years" and that it could be floated.
The bulk of the £600 million paid for SIA's stake will go to new ventures such as Internet services and a mobile phone business.
Source: Flight International
