Delta and Virgin set to unveil tie-up

I enjoyed the spat betwen SRB and WW and I reckon that as successful an entrepreneur as Branson, does not get where he is without hurting a few feelings and irritating his competitors. Good for him!

But what is the view of the experts here? Is the VA/Delta tie up good? And if so for which parties?

Indeed Matt, it could be very interesting, especially seeing as VS are not expected to begin receiving their A380’s until 2015…

I can’t imagine BA or other competitors at LHR will be glad to see Delta get more LHR access to high value business customers

I’ve got my fingers crossed for a AA/BA, DL/VS arms race between LHR and the East Coast of America… As a customer this can only be a good thing 😀

And it looks like AA might take the first shot – their new 777-300ER coming to LHR in Feb 2013 looks plush!
http://www.usatoday.com/story/travel/flights/2012/12/12/american-airlines-is-first-in-usa-to-get-new-boeing-777/1764461/
Followed by the improved BA A380 product, due to start operations to America in the summer of 2013.

I wonder what the other two will do as a response to the upgrades to capacity and service from AA/BA?

Just a few years ago, weren’t some on this board portending disaster for Delta on the LAX-SYD route? Not only have they persisted on that route, but they eventually got a code share agreement with Virgin Australia, and not satisfied with that, now have 49% of Virgin Atlantic……interesting.

SRB appears to be an interesting media figure, but not an airline manager. It will be interesting to see what this agreement portends. I can’t imagine BA or other competitors at LHR will be glad to see Delta get more LHR access to high value business customers.

The nationality of the majority owner of an airline matters because of how treaties governing slots at international airports work.

I think Sir Richard should quote Willie in full – rather than just chop and change the bits that suit his argument.

What Willie actually said in response to SRB’s wager was
“I don’t think a million pounds would hurt him, I don’t have a million pounds so maybe a bet that would be as painful to him as it might be to me – so maybe something like a knee in the groin,”
That’s totally reasonable, a knee in the groin hurts no-matter who you are.
But then, it’s not surprising SRB has so much cash piled up – after all, he doesn’t pay the UK tax rates. He lives in the tax haven Caribbean.

“The IAG chief said he didn’t know Sir Richard very well but “on the limited occasions” he had met him he hasn’t seen anything that would “make me want to meet him again”.”
Gotta love Willie :p

I wonder if BA will start painting “No way VS/DA” on their planes? :diablo:

I am not exactly sure what the laws are on foreign ownership of UK companies…but the TATA buying Jaguar/Land Rover deal is a very good example showing that there are no limits as to what % a foreign investor can have in a company. That said though, the Jaguar/Land Rover deal was done by creating a brand new company as TATA bought both seperate businesses from Ford and then they merged them together…in respect of the DL/VS tie-up, it has been stated that both carriers will remain seperate in terms of branding and service offering.

What I was suggesting however is that if DL have the 49% they’ve just bought from SQ, and then AF/KL choose to buy a further stake in VS from SRB’s remaining 51%, then in effect they will jointly own a controlling stake in VS as DL already has a Joint Venture parternship with AF/KL.

As can be expected, there has been a bit of a war of personal words between SRB and WW; who has suggested that VS would be consigned to the history books if DL buys the 49% stake in the carrier. SRB reacted by offering to pay BA staff £1m if WW’s prediction came true, however WW has declined and instead offered a more physical wager…a knee in the groin! SRB has accepted the wager, and already stated that he is looking forward to welcoming WW to VS’s HQ to give him it.:diablo:

http://www.telegraph.co.uk/finance/newsbysector/transport/9736344/Willie-Walsh-wagers-Sir-Richard-Branson-a-knee-in-the-groin-that-Virgin-Atlantic-wont-survive.html

http://www.telegraph.co.uk/finance/newsbysector/transport/9737301/Sir-Richard-Branson-accuses-Willie-Walsh-of-being-childish-after-knee-in-the-groin-wager.html

One rumor that was doing the rounds earlier last week was that once DL had purchased the 49% stake in VS from SQ, it might prompt AF-KL to try to buy an additional stake in VS from SRB so that eventually AF-KL-DL own a controlling stake in them, but as far as I am aware, any ideas of SRB giving up on his 51% has been ruled out for the time being, but a lot can happen in a short period of time, and I guess it depends on whether or not the global economy begins to pick up again…

I could be wrong, but don’t foreign ownership laws prevent foreign investors from owning more than 49%? I don’t know whether that law is still in place for EU investors?

EDIT: On second thought, I don’t think there are foreign ownership laws in the UK (TATA buying Jaguar/Land Rover is an example).

I don’t quite see why DL wants a stake in VS. There’s nothing stopping DL and VS code-sharing and aligning departure/arrival times. I wouldn’t have thought they’d have needed a stake to accomplish this, it’s in both companies interests.
I also think Delta has paid too much. The stock market values IAG at roughly £3.7 Billion, Delta’s values VS at £450 million.
So, according to Delta, VS is worth 12% of that of BA+IB – yet VS only have 7% of the number of LHR slots BA have (once you add IB at MAD into the mix, VS own about 4% of the premium slots IAG own). IAG also aren’t making huge net loses.

Of course, the slots VS own are used for more lucrative long haul traffic – but I still think they paid too much in comparison.

Virgin really seem to gotten their name in the news this week…

Not only due to the VS/DL tie-up, but the announcement of EI being the chosen carrier that will wet lease VS some A320’s for their domestic flights, plus VA have announced thrice-daily flights between Newark-Liberty International (EWR) and its hubs at LAX and SFO.

As for the VS/DL tie-up…I think its good that VS has finally managed to agree a tie-up that will allow it to compete more heavily with BA because they will still be able to offer their own flights to their usual US destinations and they will also no doubt code-share on DL’s flights to/from LHR. Plus, VS customers can make use of DL’s network for domestic connections to smaller cities, and vice-versa once VS start their domestic routes (although DL already serve EDI and MAN themselves!).

And its not as if BA can/will have any reasons against the propsals, because it will be pretty much the same for VS/DL as it is for BA/AA. If however the DoT/DoJ and ECC don’t allow the tie-up to go ahead, you can expect SRB will no doubt get very angry and protest quite a lot.

One rumor that was doing the rounds earlier last week was that once DL had purchased the 49% stake in VS from SQ, it might prompt AF-KL to try to buy an additional stake in VS from SRB so that eventually AF-KL-DL own a controlling stake in them, but as far as I am aware, any ideas of SRB giving up on his 51% has been ruled out for the time being, but a lot can happen in a short period of time, and I guess it depends on whether or not the global economy begins to pick up again…

I often find this website really useful for aviation related news…here’s their article about it:

http://www.airlinesanddestinations.com/airlines/delta-plans-transatlantic-joint-venture-with-virgin-as-share-buy-is-agreed/

I wonder if this is a response to the BA/AA duopoly on LHR to JFK?