Delta Air Lines Inc. has filed with European antitrust regulators seeking approval for its deal to acquire a 49% stake in Virgin Atlantic Airways Ltd., keeping the airline on schedule to close the $360 million deal before year's end.
Atlanta-based Delta in December agreed to acquire the stake from Singapore Airlines Ltd. as part of a broader alliance with Virgin Atlantic that will also include a request for antitrust immunity to coordinate trans-Atlantic schedules. Delta is making the investment to increase its access to London's Heathrow Airport, a highly congested airport seen as a key to winning lucrative business fliers.
Virgin Atlantic is 51% owned by entrepreneur Richard Branson, who intends to hold onto his stake post-deal.
Delta and Virgin filed their request for antitrust immunity in the U.S. last month, and according to the European Commission website will learn by June 20 whether their application will be approved in Brussels. The airlines have argued that their alliance would be good for competition because it would allow both companies to better compete against a joint venture of American Airlines Inc. and British Airways plc that they say controls nearly 60% of Heathrow's slots.
Separately, Virgin Atlantic on Thursday, May 16, disclosed a fiscal full-year loss of £69.9 million ($107 million) on sales of £2.87 billion, due to higher costs and a decline in business travel during the Olympics. The loss comes at a time when most of the Western world's airlines are reporting record profits, and underscores the need for an overhaul of Virgin Atlantic's business model.
Virgin Atlantic in February hired former American Airlines exec Craig Kreeger as CEO, and has begun a restructuring campaign that includes trimming costs, moving to more fuel-efficient jets and starting domestic service in the United Kingdom. The company also is banking on increased traffic thanks to its relationship with Delta, which can connect Virgin Atlantic passengers throughout North America and through its Skyteam international alliance can connect business travelers to locations around the world.
Kreeger said in a statement Thursday that he is committed to returning the airline to profitability in the years to come.
"Last year saw a double-dip recession, a continued weak macroeconomy, and an Olympic Games which, although a fantastic event, severely dented demand for business travel," Kreeger said. "I am confident we have concrete plans in place to take Virgin Atlantic forward and return the business to profitability within a two-year time frame."
French mergers and acquisitions lawyer Laurent Faugerolas joined Dechert LLP. For other updates launch today's Movers & shakers slideshow.
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