Newspaper article International Herald Tribune

Delta Agrees to Buy 49% of Virgin for $360 Million

Newspaper article International Herald Tribune

Delta Agrees to Buy 49% of Virgin for $360 Million

Article excerpt

Delta Air Lines on Tuesday agreed to buy a 49 percent stake in Virgin Atlantic from Singapore Airlines for $360 million, cementing the U.S. airlines' presence in the business-travel market .

There are few more lucrative airline routes than the one between the financial powerhouses of New York and London. On Tuesday, Delta Air Lines signaled that it was going after that business-heavy market, agreeing to buy a 49 percent stake in Virgin Atlantic from Singapore Airlines for $360 million.

The deal would provide Delta with more access to Heathrow Airport, one of the world's busiest hubs, where takeoff and landing rights are limited because of high demand and tight capacity. New York, where all major airlines are battling to attract high-paying passengers, is the top international destination from Heathrow.

Singapore bought its Virgin stake in 2000 for Pounds 600.3 million, or $966 million at current exchange rates, but it has been dissatisfied with the returns, analysts said. While Delta had considered buying Singapore's stake two years ago, the carriers could not agree on a price.

On Tuesday, Delta and Virgin Atlantic said they would apply for antitrust immunity from American and European competition authorities to coordinate fares and flight schedules, as well as offer seats on each other's planes. Virgin Group, headed by the British billionaire Richard Branson, has said it does not plan to sell its 51 percent controlling majority in Virgin Atlantic.

Delta has a strong partnership with Air France-KLM that serves many European destinations, but it is not a strong contender in the London market. Delta has nine flights daily to Heathrow from New York, Boston and Atlanta. But it has no direct flights from other top markets like San Francisco, Chicago, Washington, Miami or Los Angeles, requiring passengers to connect through its other hubs.

Heathrow is operating at full capacity, and the British government has rejected plans to build a third runway. As a result, landing and takeoff rights, or slots, are limited, making them rare and prized commodities for the airlines. …

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