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DL to buy 10% of AFKL and AFKL to buy 31% of VS

DL to buy 10% of AFKL and AFKL to buy 31% of VS

Old Jul 27, 2017, 10:41 am
  #1  
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DL to buy 10% of AFKL and AFKL to buy 31% of VS

I'm personally more surprised by the AF/KL purchase of 31% of VS.

http://news.delta.com/delta-deepenin...form=hootsuite
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Old Jul 27, 2017, 10:54 am
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I saw this too and was similarly surprised.

I assume this is just DL divesting some of its 49% of VS to AF/KLM, and not that the combined DL/AF/KLM ownership of VS is more than 49%.

Also took note of AZ: "The expanded joint venture, including Alitalia, will offer nearly 300 daily nonstop trans-Atlantic flights and convenient flight schedules."
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Old Jul 27, 2017, 10:58 am
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I assume this is just DL divesting some of its 49% of VS to AF/KLM, and not that the combined DL/AF/KLM ownership of VS is more than 49%.
I believe it has far more to do with a combined joint venture than just that.

In addition, Delta did not sell any of its stake to AF-KLM.

To wit:
"China Eastern, a Delta partner, will also acquire 10% of Air France-KLM, while Air France will in turn buy a 31% stake in Virgin Atlantic from parent Virgin Group."

Let's hope that the combined JV makes for a much better transatlantic travel experience!

Above cited from Delta to Acquire 10% of Air France-KLM, Combine Separate Joint Ventures

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This link is to an online source to which I contribute and/or have a financial interest.
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Old Jul 27, 2017, 10:59 am
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I can't remember when that TATL piece of the JV is over, I though something like 2021 but I could easily be off by several years, but AZ will almost certainly be out totally when it's up as they've already left the EU piece of their JV with AF/KL.

Although AZ is so messed up right now, virtually anything is in play with them...EY feeder slave, dissolved, back with AF/KL, and several others.
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Old Jul 27, 2017, 11:03 am
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So I wonder then if VS is going to formally join SkyTeam. That would sure make lounge access a lot more straightforward.

Even if they don't, adding VS to the JV should lift the inability to purchase US-LHR-XXX on a single ticket. VS doesn't have a lot of Africa/Asia flights left, but more options are always good.
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Old Jul 27, 2017, 11:12 am
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I miss the good ol' days when NWA/KLM were so tightly integrated they seemed to function as one.
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Old Jul 27, 2017, 11:39 am
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Interesting. Hopefully, this works out better for the parties involved than EY's foray into equity tie-ups. Though, I would suggest that EY's error was investing in some deeply distressed companies and that the strategic fit was always questionable.
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Old Jul 27, 2017, 11:46 am
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With Brexit won't this mean VS will be controlled by a non-UK entity? 49 plus 31 is 80 percent. No problem while UK is still in EU, but an issue once out.
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Old Jul 27, 2017, 11:55 am
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Originally Posted by flyerCO
With Brexit won't this mean VS will be controlled by a non-UK entity? 49 plus 31 is 80 percent. No problem while UK is still in EU, but an issue once out.
I think that technically all of those things have to be negotiated between the EU and the UK. I'd imagine it's a much bigger issue for IAG with all of their many holdings.
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Old Jul 27, 2017, 11:56 am
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Originally Posted by kop84
I'm personally more surprised by the AF/KL purchase of 31% of VS.

http://news.delta.com/delta-deepenin...form=hootsuite
If simple addition-math holds in these JVs with respect to power:

DL will get: 49% direct VS + 10% x 31% indirect VS = 52.1% VS.
Majority!
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Old Jul 27, 2017, 12:01 pm
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Originally Posted by BOSTravels
If simple addition-math holds in these JVs with respect to power:

DL will get: 49% direct VS + 10% x 31% indirect VS = 52.1% VS.
Majority!
That's exactly the math I was just doing in my head when I saw the thread title

This definitely seems like DL now has, in some technically, a majority stake in VS. As has been stated in other threads, VS doesn't have much intl service, so it'd be interesting to see the effect of this, if any.
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Old Jul 27, 2017, 12:04 pm
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Originally Posted by BOSTravels
If simple addition-math holds in these JVs with respect to power:

DL will get: 49% direct VS + 10% x 31% indirect VS = 52.1% VS.
Majority!
That is an interesting proposition, but if AF/KL take a 31% share, then obviously DL's 49% share gives them a plurality stake and wouldn't that technically give them the controlling interest even before factoring in the fractional ownership of a fractional ownership?

I honestly have no idea, but I can't imagine it can't be as simple as either of us are making it out to be.
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Old Jul 27, 2017, 12:06 pm
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Originally Posted by BOSTravels
If simple addition-math holds in these JVs with respect to power:

DL will get: 49% direct VS + 10% x 31% indirect VS = 52.1% VS.
Majority!
DL will have 49% voting shares assuming that all shares have voting rights and AFKL will have 31% voting shares. DL does not, in theory, gain voting shares in VS because it owns 10% of the AFKL shares. It may be able to exert influence on how AFKL votes, but one cannot do the equation which you offered with any validity.
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Old Jul 27, 2017, 12:07 pm
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Just found this on Twitter from Richard Branson...2 key takeaways for me.

1) It seems that VS and AF/KL are seeking to be part of 1 big JV with DL instead of 2 separate ones...that could be interesting given the slots that AF/KL have a LHR.
2) seems to me that come Christmas RB gets to knee Willie Walsh in the balls...and RB intends to collect on that debt!

https://www.virgin.com/richard-brans...irgin-atlantic
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Old Jul 27, 2017, 12:07 pm
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Very interesting. Looks like DL/AF/KL/AZ/MU/VS alliance may an alliance within alliance. Sort of like LH Group airlines are treated differently then other StarAlliance airlines.
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