Yesterday, on the 11th of December, Delta Air Lines officially announced that it was purchasing a 49% stake in British flag carrier Virgin Atlantic, from Singapore Airlines, for US$360,000,000 and forming a trans-Atlantic joint venture. Under the terms of the deal Sir Richard Branson, the founder of Virgin, will retain his 51% majority stake in the airline, and continue to control the Virgin Atlantic brand.
While Delta’s 49% stake purchase in Virgin Atlantic was announced as “Breaking News” by some media outlets, this deal has been a long time in the making. Back in December 2010 there were a number of media rumours, from reputable business news outlets, that Delta Air Lines was exploring a merger with Virgin Atlantic … this story had some significant hole in it, including international law prohibiting the merger of a U.S. and British airline.
But … if I may toot my own horn for a second … on the 15th of December 2010 I wrote Delta Air Lines & Virgin Atlantic Merger? It Can’t Happen, which included this at the end of the article:
I have learned never to say “It can’t happen” in the airline industry … but with the way this news story being reported I am going to go ahead and say “A merger between Delta Airlines and Virgin Atlantic cannot happen.” What could happen? Delta could offer Singapore Airlines roughly US$350,000,000 to purchase its 49% stake in Virgin Atlantic, form a joint venture agreement for Trans-Atlantic routes and become a major competitor to British Airways and American Airlines.
So, is Delta Air Lines purchasing a 49% stake in Virgin Atlantic for US$360mil and forming a joint venture a surprise? It shouldn’t be.