Delta Air Lines to buy 49% stake in Virgin Atlantic Airways.

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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.

Aircraft order: ILFC confident of China dominance.

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International Lease Finance has shrugged off threats from a growing number of domestic players in China, its biggest single market, saying it has the “first mover” advantage with over 200 planes on order.

China’s insatiable appetite for air travel thanks to a growing wealthy population has created opportunities for leasing firms, which own about two aircraft in five of the global fleet.

ILFC, the aircraft leasing arm of American International Group, whose multi-billion dollar initial public offering is on hold, is the largest aircraft lessor in China with a 35 percent market share, or 180 planes deployed there, its chief executive Henri Courpron said.

China will need 5,260 new aircraft worth $670bn by 2031, according to Boeing, of which about 40-50 per cent would be owned by leasing firms, taking the market size to $268bn in the next two decades.

The Chinese market is fragmented with at least 20 domestic players — many of them small and new to the sector. But it is the foreign players, including ILFC and rival GECAS, that dominate the market, taking a combined 90 per cent of the business.

ILFC has a portfolio of more than 1,000 owned or managed aircraft, and another 239 new fuel-efficient aircraft, including Boeing 787s and Airbus A320neos, on order. And it has the rights to purchase an additional 50 of such aircraft.

If the new lessors in China were to order those planes today, they could only get them in 2018 or 2019.

ILFC has been looking for areas of growth and beefed up its presence in the Asia Pacific region by opening offices in Singapore and Beijing this year.

“China is a big consumer of new aircraft. We are well positioned to take advantage of that,” ILFC head of Asia Pacific David Nixon said.

“We have 240 aircraft coming in over the next five years and we expect a lot of those airplanes to wind up with Chinese airlines, Chinese carriers.”

Aircraft leasing firms sprang up in China over the past few years with Industrial and Commercial Bank of China, and Bank of Communications setting up financial leasing arms in 2007. They were followed by China Construction Bank, China Minsheng Banking and China Development Bank.

“Airbus and Boeing deliver more and more planes every year and the share of financing organised by leasing companies is also increasing, so there is room for everybody,” Courpron said.

He also said the lessor was ready for an IPO as its parent AIG had made clear that ILFC was a non-core unit and that it would like to sell all of its interest in it over time. The company was still waiting for the right time, which could be 2013 or even 2014, he said.

“We are in a zone from a calendar stand point that is not favourable to an IPO because of the uncertainty in the US because of the election,” Courpron said.

 ILFC on Thursday reported operating income of $39m in the third quarter, compared to an operating loss of $1.3bn a year ago when it took $1.5bn of impairment charges and fair value adjustments.