Monday, January 17, 2011
Branson considers reducing airline stake
By Pilita Clark in Toulouse
Published: January 17 2011 21:10
Last updated: January 17 2011 21:10
Sir Richard Branson said he was reluctantly looking at selling off part of Virgin Atlantic, the UK-based airline he founded nearly 27 years ago, to make sure it survives mounting competition from larger rivals.
“My preference would be to keep control of the airline,” said the billionaire entrepreneur, whose Virgin Group has a 51 per cent stake in the carrier, with the remaining 49 per cent held by Singapore Airlines.
Virgin last year hired Deutsche Bank to review the airline’s options after US authorities finally agreed to allow rivals British Airways and American Airlines to run their transatlantic businesses jointly, in spite of strenuous opposition from Sir Richard.
“Since the competition authorities in their wisdom have allowed these mega alliances, in order to protect Virgin Atlantic long term ... we’re now going to have to make sure we have the firepower and the strength to survive the next 50 years,” he said.
“Obviously Virgin Atlantic has been a bit of a baby to me,” he told the Financial Times on Monday. “We’re obviously very attached to the airline but equally I want to be sure she’s still around in 50 years’ time.”
Delta Air Lines in the US has been mooted as a potential buyer but Sir Richard said that there were “a number” of interested parties and “we’ll see how discussions go”.
Sir Richard, who is recovering after a skiing accident, was speaking in Toulouse where one of his more recent start-ups, Virgin America, announced 60 firm orders, as opposed to memoranda of understanding, for Airbus’s best-selling A320 jets.
Thirty of the aircraft ordered by the San Francisco-based low-cost airline, in which Sir Richard’s Virgin Group has a 25 per cent stake, will be A320 NEO’s, a new version of the single-aisle workhorse with next generation engines that Airbus says will make it 15 per cent more fuel-efficient than existing models.
That added efficiency will allow Virgin America to start flights from the US west coast to Hawaii, said the airline’s chief executive, David Cush.
The 60-jet deal is worth $5.1bn at list, or advertised, prices though airlines frequently negotiate substantial discounts on these figures and Sir Richard said he was “sure” this had been the case with Virgin America.
He believed the fuel efficiency of the aircraft was critical to the industry’s future and Airbus’s US rivals at Boeing needed to follow suit. “If Boeing don’t match it they are out of business in the small jet market,” Sir Richard said, adding that he believed they would do so.
Copyright The Financial Times Limited 2011.
Posted by Steve at 2:49 PM