December 2, 2012 More on the Virgin Atlantic Issue
Virgin Atlantic recently acquired the short haul slots of LHR that belonged to bmi that BA had to divest as part of their takeover of bmi. Even more interesting is that Delta Airlines has tendered an offer to Singapore Airlines for their 49% of Virgin Atlantic according to the Sunday Times. Previously reported on and commented on by this blog was that Virgin was in talks with an unnamed airline looking at admission into one of the “big-three” airline alliances. Now Delta Airline is looking at acquiring a minority stake in Virgin.
According to standard corporate governance laws, the stake while not controlling would allow Delta to change at least some of Virgin’s board of directors. This may, and I emphasize may, get Virgin to make a move into Sky Team. The effects of this move would be wide reaching for Airline Alliances, British, and American aviation.
A Virgin move in to Skyteam extends the alliance into untouched US-LHR transatlantic markets and UK-Caribbean routs. It also gives Sky Team an incredibly strong presence in Northwest Europe with hubs in LHR, CDG, and AMS. While LHR will continue to be a OneWorld hub with BA, Star Alliance will see reduced influence in those markets.
This purchase if it happens will see the opening of a hub in LHR to rival that of BA. I along with others have been suggesting a bmi-VA merger as a way to create an alternative to BA. Apparently, Virgin has adopted this idea. While VA doesn’t get the bmi operation they do get some of their slots and none of their problems all of which were inherited by BA. This was a very shrewd move by Virgin leadership. While I think the entire operation could have been beneficial to Virgin, their leadership thinks that the lack of operations and slots is made up for by the lack of problems.
Here’s what people haven’t considered. Delta taking a stake in Virgin will force US Airways to merge with AA and move the new airline in One World. US Airways is currently the only legacy domestic partner with Virgin. If Delta moves on Virgin, Delta/Skyteam will force Virgin to end that relationship and restart with Delta. Now US Airways gets some revenue from VA-US connections in the US and additional access to LHR through codesharing.
The United Airlines / US Airways relationship has never really been more than pro-forma. The rumor was that US Airways was threatened with expulsion from Star Alliance if they did not allow Continental Airlines (now merged into United Airlines) into Star Alliance. While I am not privy to Star Alliance admission rules, this rumor seems to suggest that each airline has some sort of veto over admission of new members. In light of this relationshi, and the reduction of access to LHR through the Virgin partnership it will make it more likely that US Airways will cut a merger deal with American, exit Star Alliance, and enter One World.
See the whole article here.
Tags: Virgin Atlantic