Branson set to relinquish control of Virgin Atlantic

Virgin Atlantic yesterday revealed it had been approached by a series of rivals over potential tie-ups, increasing speculation that Sir Richard Branson is preparing to relinquish control of the carrier he founded in 1984.

The airline has appointed Deutsche Bank to "look at all strategic options", part of which will be to evaluate deals with other carriers. A Virgin spokesman said yesterday that since the investment bank was brought in, "we have received a number of lines of enquiry".

However, he cautioned: "It is far too early to comment on individual details." And the spokesman refused to shed light on the identity of the suitors, in spite of reports emerging that the US airline Delta had made an approach.

"Virgin has a very strong brand and it is attractive to those seeking alliances."

A tie-up, whether by a merger or an alliance, with Delta would be attractive as it would strengthen Virgin's transatlantic business and bring it into the SkyTeam alliance of 13 airlines.

Gert Zonneveld, an airline analyst at Panmure Gordon, said: "Virgin does not want to be left at a disadvantage as others form alliances. But it is not as easy as just being able to merge, as there are issues around consolidation in the industry."

This year analysts had mooted a deal between Virgin and British Midland International, owned by Lufthansa. Others suggested Sir Richard could sell down his stake, allowing the group to become part of a wider alliance.

Virgin is especially attractive torivals because of its landing slots at Heathrow. It is the second-largest long-haul carrier operating out of the airport. However, industry consolidation has threatened to leave the carrier in the cold. It has not joined any of the three industry alliances: SkyTeam, OneWorld and Star Alliance. The review is expected to continue for some time, with a deal unlikely before the spring.

Meanwhile, British Airways has merged with Iberia, and formed an alliance with American Airlines. "The industry is moving towards consolidation – this is an important step for both airlines," BA said last month. The combined group will be lead by the BA chief executive Willie Walsh.

The spokesman for Virgin added: "Following the moves by BA and Iberia, we are not keeping our heads in the sand. We thought it would be an opportunity to look at the whole landscape. We are still confident in our strategy."

James Halstead, an independent airline analyst, said: "Virgin may feel a bit squeezed. It has to think strategically about what it needs to do."

Sir Richard owns 51 per cent of Virgin Atlantic, with Singapore Airlines holding the other 49 per cent. In May, he prompted speculation of a potential deal after he admitted that the airline might not be able to remain independent in the face of increasing industry consolidation.

However, just last month, Edmond Rose, director of commercial planning, said the company had no plans to join an alliance. He added: "We are very confident of our business and future growth strategy and do not need to be part of a global alliance to ensure success."

Mr Halstead said: "The industry is very fragmented and airlines are looking to consolidate to make some sense of it all." He added that there were "huge issues" over changing ownership, with restrictions placed on changes ofjurisdictional ownership with the national flag carriers, but regulation is gradually loosening. "In any other industry these guys would already have been buying each other," he said.

Who's flying with who?

Star Alliance

Star has 27 member airlines, more than 4,000 aircraft and carries 603.8 million passengers a year. Its carriers include Lufthansa, Air China, Continental Airlines, SAS, Air Canada and Singapore Airlines.

OneWorld

Its 12 airlines carry almost 300 million passengers a year to 136 countries. They include British Airways, American Airlines and Iberia, as well as Cathay Pacific and Qantas.

SkyTeam

SkyTeam's carriers, including Aeroflot, Air France/KLM, Korean Air, China Southern and Vietnam Airlines, take 384 million passengers a year to 169 countries.

Virgin Atlantic

Sir Richard Branson founded the airline 26 years ago. It has a fleet of 38 aircraft, flies 30 routes worldwide and has so far remained outside any of the airline alliances.

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