Sir Richard Branson's Virgin Group is flogging off a major stake in the airline Virgin Atlantic at bargain basement prices to Air France-KLM and existing investor Delta Air Lines.
Air France-KLM is to buy 31 percent of Virgin Atlantic for £220m. The Virgin Group will hang on to just 20 percent of the troubled trans-Atlantic airline, they will also continue to chairman the company.
Delta, which bought a stake in Virgin Atlantic from Singapore Airlines in 2013 of 49 percent, will now buy an additional 10 percent stake in Air-France KLM for €375m, granting them a seat on the board of the European giant.
Shai Weiss, chief commercial officer for Virgin Atlantic, said the deal was not linked to the UK’s impending exit from the EU. “I can say really definitively this has nothing to do with Brexit,” he said, adding the rationale was entirely commercial. Mr Weiss said the airline did not fly intra-Europe and so the joint venture was not a way to secure such flying rights post-Brexit. The success of its existing joint venture with Delta, which had helped provide so-called feed traffic - passengers who take a short haul flight to a hub airport before travelling on a long haul flight - could now be replicated with passengers from Europe, Mr Weiss said.
There are some concerns, although mainly in the scaremongering British media that if the UK suffers a hard Brexit and adopts rules that state airlines have to be majority domestic owned would mean big trouble for Virgin as it will be only 20 percent British own. However if a more gentle Brexit is maintained the overall ownership of the airline wouldn't matter.Over the last two weeks, Sir Richard Branson sent a letters to the airline's staff announcing the deal, claiming to be still be the largest individual investor. He said the airline industry had consolidated much since Virgin Atlantic was launched in 1984, promising now was the right time to "put ourselves at the heart of an important alliance".
"With these three partners in place and with me – and one day, the wider Branson family – still very much involved, we have the foundations to make sure this is so,"
The deal, set to last for at least 15 years once it gains regulatory approval, will, subject to regulatory approval, see the carriers combine their transatlantic routes. Should this deal get the green light the new venture would have more than 300 daily non-stop transatlantic flights from 12 hubs including from Amsterdam, Atlanta, Heathrow, Paris, New York’s JFK and Los Angeles.
Sir Richard said “one of the best moves” his company made was tying up with Delta Air Lines five years ago, partly to compete with the British Airways and American Airlines alliance.
There are some in the industry that see this as a way of Sir Richard gradually and gently bowing out of the airline industry altogether. "I think Richard has had enough of this game and within 20 years there wont be an airline called Virgin Atlantic in the skies." an executive in the office in Crawley said on Friday afternoon.