Virgin Atlantic founder Richard Branson has confirmed the airline is seeking a merger partner, ending months of speculation.

Earlier this year Branson appointed Deutsche Bank AG to assess options for the 51 per cent stake his Virgin Group holds in the airline.

Singapore Airlines holds the remaining share of the airline.

While it is now likely Branson will sell down his share, he will remained involved.

“I will certainly still be extremely involved in the airline, whatever we decide to do, and I will still be a major shareholder,” Branson said in an interview with Bloomberg.

“We are in discussions with various people and will see what comes out of it,” he added.

Virgin Atlantic has seen a growing need to merge with a rival or join an airline alliance to survive in the increasingly competitive world of aviation.

The growth of cross-border super carriers has played a major role. For example, the partnership of American Airlines and British Airways on profitable transatlantic routes has hit Virgin.

At present Virgin Atlantic has 288 takeoff and landing slots at Heathrow.

This represents three per cent of the total and would allow any potential buyer to add flights to US and Asian business markets.

Source: BTN

Virgin Atlantic may need to merge with a rival or join an airline alliance to survive in the increasingly competitive world of aviation, which has been changed by the advent of cross-border super carriers.

After falling behind in European consolidation following Air France's merger with Dutch-based KLM, Lufthansa's recent tie-ups and last year's BA-Iberia merger, Virgin needs a partner or else could be left behind.

The airline, formed in 1984 by British billionaire Richard Branson, who still owns a 51 percent stake through his Virgin Group, has attracted admiring glances from a number of rivals.

Singapore Airlines is looking to sell its 49 percent stake in Virgin, which has hired Deutsche Bank to conduct a strategic review that could lead to a whole or partial sale or to Virgin joining an airline alliance.

Here are some scenarios for how events could unfold:

TAKEOVER

Virgin could face a takeover approach, with industry analysts seeing a bid as most likely to come from a combination of Air France-KLM -- Europe's largest airline by revenue -- and US carrier Delta Air Lines, which has been working with Goldman Sachs to identify possible targets for several months.

Air France-KLM and Delta would be keen to get hold of Virgin's 288 takeoff and landing slots at London's Heathrow airport -- 3 percent of the airport's total -- to help them add more services to the United States and Asia from Europe's busiest hub.

Abu Dhabi's Etihad Airways has also expressed interest, though European Union (EU) rules state the region's carriers must be under European control, meaning any move for Virgin would have to involve an EU airline.

JOIN AN ALLIANCE

Virgin, the second-largest long-haul carrier at Heathrow, could also join a global alliance, a deal which would be attractive to Branson because it wouldn't end his control. It has a choice of the three: SkyTeam, Star Alliance and oneworld.

Air France and Delta's SkyTeam may be Virgin's most likely alliance as it does not have a UK partner and holds just 5 percent of the slots at Heathrow, compared with oneworld's 47 percent and Star Alliance's 25 percent.

Virgin, which has no agreements in place with oneworld or SkyTeam members, already has codeshare agreements with Star Alliance members, including Air China, bmi and US Airways. Star also includes Air New Zealand, Virgin's partner on trans-Tasman routes, and Singapore Airlines, its part owner.

Oneworld, which already has IAG-owned British Airways as a member, looks to be the least likely destination.

STAKE SALE

Virgin Group and Singapore are willing to sell at least part of their stakes, though Branson wants to retain an interest.

However, Singapore is keen to sell the entire stake it bought in 1999 for around GBP£600 million (USD$965.8 million), according to an aviation banker who wished to remain nameless.

"There's a book on it (Virgin Atlantic)... all (the stake) is worth is what they can sell it for because it's not making them any money," said the banker.

Ireland's Ryanair and Dubai's Emirates are also keen on buying a stake, according to UK press reports.

REVISIT LUFTHANSA DEAL

Another option for Virgin would be for it to get Lufthansa back to the table. Talks between the pair over the potential merger of Virgin with UK carrier bmi failed in 2009 with bmi being taken over by Lufthansa without Virgin's involvement.

A merger would have helped Virgin better compete with its main rival BA, allowing it to use bmi's short-haul network and slots at Heathrow to further international expansion.

Source: Reuters

Air France-KLM of Europe has teamed up with United States-based Delta Air Lines to consider a bid for Virgin Atlantic.

Owner Richard Branson is presently considering his options for the carrier in an increasingly competitive market.

Deutsche Bank has been appointed to examine strategic options, with a sale of Branson’s 51 per cent stake now a growing possibility.

Singapore Airlines holds the remaining shares in Virgin Atlantic after buying a 49 per cent share for £600 million in 1999.

Air France-KLM and Delta – already partners as part of the SkyTeam Alliance – are believed to be among the frontrunners for any deal.

Any deal would cost between £700 million and £1 billion, with Virgin Atlantic’s key landing slots at Heathrow central to any deal. 

Global Consolidation

Delta Air Lines recently lost its position as the biggest airline in the United States following the merger of United and Continental Airlines.

The move is part of a growing global consolidation trend.

In Europe British Airways recently merged with Iberia of Spain in a £5.2 billion deal to create International Airline Group (IAG).

Branson was public in his opposition to the deal and its eventual success may have prompted his decision to sell.

IAG has also secured a partnership with American Airlines on lucrative transatlantic routes, further squeezing Virgin Atlantic.

Etihad – recognised by the World Travel Awards as the World’s Leading Airline - is also thought to be interested in buying Sir Richard’s stake.

Chief executive James Hogan has written to Deutsche Bank to express an interest in a potential deal.

Etihad - the carrier owned by the ruling family of Abu Dhabi - has hired Bank of America Merrill Lynch to advise it.

Last year Air France and Delta joined to invest £1.3 billion in Japan Airlines, the ailing Asian carrier.

Japan rejected the approach in favour of remaining in the Oneworld airline alliance with American Airlines and British Airways.

Source: BTN