Sabai

Air France owns KLM.

motytrah

+1

The more we dig into VS the less I think they really need to be bought per se. I think SQ wants cash right now and it's the right move for them. I don't think VS would mind DL taking SQ's shares and wouldn't mind having some code shares. However, VS has £486.7 cash in the bank and I haven't seen a compelling case for them to join ST.

The Wild Cards in all this is VS's CEO retires next year and what EU regulators would do.

ClipperDelta

You can rest assured that Delta will not pony up all that $$$ for some codeshares and FF relationships; they will not make the same mistake that SQ made - buying up to 49% of VS, and having almost no say in VS's strategic direction. Part of any deal will have to have, first and foremost, VS join the DL/AF/KL/AZ JV. Skyteam membership could also be a requirement.

SRB's ego and resistance to partnerships/alliances is what has gotten him into trouble in the first place. In the old world, his belief of going it alone and that his sexy product would be enough to keep customers coming back may have been enough for VS to keep aloft, but in the age of consolidation and mega-networks (including JVs), a stand-alone VS is simply not going to make it in light of the BA/AA juggernaut (and BA's recent acquisition of BD).

motytrah

Why would VS give DL (or any other perspective buyer of the minority stake) any additional rights? VS isn't getting the money, SQ is.

mtkeller

My reading of the situation is that DL doesn't care to do this if AF/KL can't buy enough off SRB to allow AF/KL/DL majority control.

I also seem to recall that SQ had written down the value of their VS stock to essentially nothing, so VS would stand to gain from someone buying it and taking an interest in the airline. They'd probably be willing to do something to facilitate that.

pbarnette

I simply don't get this notion that VS is somehow so different from other carriers that they won't benefit from joining a JV. Immunized JVs have been very successful and increasingly critical to success.

VS doesn't have other options. They can't grow on their own and BA/AA now dwarf them at LHR. They are constrained and this helps them grow their reach without having to do it on their own. With LHR's slot constraints, it makes a JV even more attractive. Plus, aligning with the Skyteam carriers increases potential feed. Heck, I could even imagine a scenario whereby AF/KL might see fit to utilize some capacity to serve non-hub destinations from LHR. It just makes sense.

I would also note that people are overplaying VS's resistance to an alliance. They recently went through a strategic review and they've acknowledged that they are investigating joining an alliance. Whether it is this deal or something else, I think VS joins an alliance sooner than later.

Cloudship

But by joining an alliance they are severely limiting their other JVs. Delta right now does not have a JV with them, but there is no reason tehy cannot. Why be forced into an alliance when you can have JVs with both Delta and US Air.

I think the whole JV/Merger craze is going to die soon. Other than Delta I have not seen it working out strongly for many. Look at *A - for US they are now at odds with the giant US, and suffer some of the backlash against their current stress. By joining SkyTeam, VS is now going to compete int eh transatlantic market against the AF/KLM giant, at a disadvantage because they have no real european connections.

Dieuwer

I don't think DL + VS will be competing with AF/KL. In fact, it will be accretive as it will grant DL more access to LHR, while leaving ex-US to EU-continent to AF/KL.

JustaGoodGuy

I would think that for this to work for Delta, Virgin would have to agree to realign their North America route map. I would think that Delta would be interested not only in JFK, but would also want VS to connect to at least ATL and perhaps a few other hubs. This not only helps DL, but also helps VS in that it allows loyal VS flyers to connect to other cities in the US.

If AF joins in the equation, then I would think that VS would have to align with the AF & KLM hubs as well.

It is true that DL is only buying the shares from SQ and thus no money goes to VS, but I would think that Branson knows that he has to join the JV and alliance world for VS to be successful. Branson may love the Virgin brand, but I don't think that he loves loosing $80 million a year.

Dieuwer

Realign? Seems to me YVR/SFO/LAX - LHR are great routes to have in a DL/VS tie-up. DL still could operate DTW/JFK/ATL - LHR, while leaving other East-Coast routes like BOS-LHR for VS to operate.

adamj023

There was a change in ownership but I am not sure of the split now. After the AF447 crash, KLM management wound up taking over control of Air France.

Branson built up a large airline which gained reputation and a large consumer base for US to British travelers and the brand is well recognized and he ran the organization extremely well with the teams.

But now due to competition from BA/AA, which was already noted in the past back when there was NO BA/AA on their airplanes in the 1990's and which continue to this day, competition has taken its toll on Virgin.

So Virgin has to partner with another firm which has additional frequency for LHR.

And the Delta one seems to make the most sense.

http://www.zimbio.com/photos/Richard...ll/MHD1p8_d6HT

Delta and Virgin both have the right teams in place to make this happen.

Increased marketshare due to the alliance will be enough to bring Virgin into profitability and Delta will also reap profits.

For Virgin this reduces the fuel costs due to Trainer refinery and Delta gets access to the fuel resources of Virgin in the UK or can spur new investment in reducing costs in the UK fuel infrastructure.

Fuel savings costs, combined by additional marketshare gained by the alliance will be enough to save the company for the future.

Airlines continue to make national or multinational mergers and joint partnerships and this trend will continue.

bk42

US Airways is not in the Star JV across the Atlantic. It only codeshares.

I've never heard of a carrier double-dipping on JVs on a single route w/ two or more groups. They petition the DOJ for admitting another airline into existing JVs, or they have separate route portfolios w/ other airlines, but they don't intermingle.

ElmhurstNick

I don't think they'd have to realign much. They have the daytime EWR-LHR which goes on to India, so i don't think that would get moved, and thus the evening frequency isn't going anywhere either. The seasonal ORD would probably be chopped and moved to either ATL or to take over DL's BOS-LHR evening flight. Maybe they'd try to move the seasonal YVR down to SEA to compete head-to-head with BA for connections to AS. EWR is the home of their daytime flight which continues on to India.

What else would they really move?

pbarnette

What other JVs are these?

Really? You missed the hoops BA and AA went through to get it done? And VS's virtual network strategy relying on them? And QF jumping into bed with EK in response? I don't see much evidence that the JV era is coming to an end.

Considering that AF and KLM merged in 2004, I think this idea of "KLM management" is quite silly.

adamj023

There are plenty of people that would book Delta that would have never thought to call up Virgin Atlantic to book tickets before and Delta only had minimal 767-400ER Service.

I was surprised Delta didn't up the 767-400ER to a 777 but it seems as they one upped this with the Virgin deal and so they will get full access to much larger jets and have have access to Virgin AND Delta slots.

Delta must have been wanting more premium seats to sell on the JFK to LHR route which are very lucrative.

Deal was a no brainer, and will happen. Other potential future deals for Delta exist like Skymark Airlines in Japan in the future.

AA has a deal with JAL while Delta really needs a Japanese partner.