Singapore Airlines has agreed to sell its 49 per cent stake in Virgin Atlantic Airways Ltd to Delta Air Lines for $360 million in cash.
The agreement is subject to regulatory approvals being obtained in Europe and the United States. If this happens, Singapore Airlines expects the transaction to close in the fourth quarter of 2013.
Singapore Airlines acquired its stake in Virgin Atlantic Airways in March 2000. SIA says it has “been evaluating its strategic options for the stake for some time, as the investment has not performed to expectations and the synergies the parties originally hoped for have not materialised”.
SIA expects its commercial arrangements with Virgin Atlantic encompassing codesharing, frequent-flyer program ties and reciprocal lounge access to remain in place after divestment of its shareholding in the UK carrier.
Virgin Group and Sir Richard Branson will retain the majority 51 per cent stake in Virgin Atlantic Airways and the carrier will retain its brand and operating certificate, Delta Air Lines confirms.
Additionally, together with its purchase of the 49 per cent Virgin Atlantic shareholding, Delta Air Lines has reached agreement with Virgin Atlantic Airways to form a new joint venture on transatlantic routes.
The two carriers say that, if given regulatory approval, the joint venture would create an expanded transatlantic network and enhance competition between the U.K. and North America.
Specifics of the agreement include:
● A fully integrated joint venture that would operate on a “metal neutral” basis, with both airlines sharing the costs and revenues from all joint venture flights;
● A combined transatlantic network between the United Kingdom and North America, with 31 peak-day round-trip flights;
● Enhanced benefits for customers including cooperation on services between New York and London, with a combined total of nine daily round-trips from London Heathrow Airport to New York JFK and Newark Liberty International Airport;
● Reciprocal frequent flyer benefits; and
● Shared access to Delta Sky Club and Virgin Atlantic Clubhouse airport lounges for elite passengers.
Delta and Virgin Atlantic will file an application with the U.S. Department of Transportation for antitrust immunity, which if approved would allow a closer relationship and coordination on schedules and operations.
The transaction will also be reviewed by the U.S. Department of Justice, the European Union’s competition regulator and other relevant authorities. Delta expects both the share purchase and the joint venture to go ahead by the end of 2013.
“Our new partnership with Virgin Atlantic will strengthen both airlines and provide a more effective competitor between North America and the U.K., particularly on the New York-London route, which is the largest airline route between the U.S. and Europe,” says Delta CEO Richard Anderson.
“Consumers will reap the rewards of this partnership between two great airline brands on services from the UK to the USA, Canada and Mexico through a shared ethos in the highest standards of customer service,” says Steve Ridgway, Virgin Atlantic Airways’ chief executive. “This joint venture will deliver much more effective competition at Heathrow.”
Adds Ridgway: “Both airlines are confident that the Department of Transportation will be as convinced as we are of the extensive consumer benefits arising from this joint venture, with expedited approval being granted by the end of 2013.”
Ridgway continues: “The transatlantic market is Virgin Atlantic’s heartland – it’s where we started. By aligning with Delta we can continue to grow our North American network and offer greatly enhanced connectivity across the USA.”
Delta and Virgin Atlantic customers will be able to earn and redeem miles across Delta’s SkyMiles and Virgin Atlantic’s FlyingClub frequent flyer programs. Premium customers also will have reciprocal access to the Delta Sky Club and Virgin Atlantic Clubhouse airport lounges.
According to Delta, the partnership would allow both carriers to offer a greatly expanded network at London Heathrow Airport and to overcome slot constraints, which have limited the growth and competitive capability of both airlines.
The two carriers would operate a total of 31 peak-day round-trip flights between the U.K. and North America, 23 of which operate from London Heathrow.
As part of a $3 billion investment in enhanced global products, services and airport facilities, all of Delta’s flights between the U.S. and London Heathrow feature full flat-bed seats offering direct aisle access in the BusinessElite cabin. These flights also offer Delta’s Economy Comfort seating in the forward section of the economy cabin.
Virgin Atlantic has recently completed a £150 million ($240 million) upgrade program. The carrier has introduced a new Upper Class cabin for its Airbus A330-300 aircraft, Virgin Atlantic claiming that the cabin features the longest flat bed seat in the sky.
This is complemented by a redesigned onboard bar and new Clubhouse lounges at both New York JFK and Newark airports.
The airline has also completely refitted its Boeing 747-400 leisure fleet to offer onboard connectivity and VERA Touch, Virgin Atlantic’s touch-screen in-flight entertainment system.
Corporate and travel agency customers of both airlines also will benefit from an aligned sales effort on both sides of the Atlantic.