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Delta Air Lines Incorporated is nearing a deal to buy a 49 per cent stake in Virgin Atlantic Airways Limited from Singapore Airlines Limited and may pay less than $500m for it, three people familiar with the matter said.
The price range is $300m to $500m and an agreement may be announced this week, said the people, who asked not to be identified because the talks are private. Singapore Airlines paid £600m for the Virgin Atlantic stake in 1999, or about $966m now.
Bloomberg News reported that Delta and Virgin Atlantic may seek a joint venture on trans-Atlantic routes as part of the arrangement, two of the people said.
Virgin Atlantic’s base at London Heathrow airport is a gateway for flights across the North Atlantic, the world’s most lucrative market for premium passengers.
“Heathrow access, that’s what Delta finds attractive here,” said Savanthi Syth, an analyst at Raymond James & Associates Incorporated in St. Petersburg, Florida, who rates Atlanta- based Delta outperform.
“This is not necessarily a carrier that they expect to make a big return on investment on. There’s a reason Singapore is getting out.”
Virgin Atlantic, founded and majority-owned by United Kingdom billionaire Richard Branson, posted a pretax loss of $129m for the year ended in February, and has delayed adding planes.
Representatives of Virgin Atlantic, Singapore Airlines and Delta declined to comment about the sale process.
Delta, Air France-KLM and their SkyTeam partners are the smallest alliance group at Heathrow, with about 5 percent of takeoff and landing slots. Oneworld, led by British Airways and AMR Corp.’s American Airlines, dominates with almost half of all service, followed by United Continental Holdings Inc. and its Star Alliance partners with about a quarter of slots.
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