Virgin Atlantic must seek a new airline partner if it is to survive long term, founder Sir Richard Branson has said, admitting he may have to dilute his control.
Branson told reporters at the Airbus manufacturing base in Toulouse on Monday: “We needed to look at an alliance partner for the long-term stability of Virgin Atlantic. Whether it is purely an alliance or more than an alliance, we’re completely undecided.”
Rival news agencies drew differing conclusions from his remarks. The Financial Times reported Branson was “looking reluctantly at selling his controlling stake in Virgin Atlantic”, while business news agency Bloomberg reported Branson “doesn’t foresee any deal that would end his control of the airline”.
Branson’s Virgin Group owns 51% of Virgin Atlantic, with the remaining stake held by Singapore Airlines. The latter is also reported to be interested in selling part of its stake.
The Virgin Group chairman said: “My preference would be to keep control of the airline . . . but equally I want to be sure she is still around in 50 years’ time.”
He suggested the transatlantic partnership between British Airways and American Airlines, which won anti-trust immunity last year, meant his carrier could no longer remain outside the pattern of global airline alliances.
Three groups dominate long-haul travel - BA’s Oneworld, the Star Alliance of Lufthansa and United Airlines-Continental Airlines, and Air France-KLM and Delta Air Lines’ SkyTeam – with just Virgin Atlantic and the Middle East carriers outside.
“Since the competition authorities have allowed these mega alliances, we’re going to have to make sure we have the firepower and strength to survive the next 50 years,” said Branson.
“We have enjoyed being independent but we think having some kind of alliance will make us that much stronger. We are going to need a big brother to take us through the next 30 years.”
Virgin Group hired Deutsche Bank last year to review potential investors. The bank is not expected to complete its review for several months.
US carrier Delta Air Lines is understood to have expressed interest in the carrier and lacks a UK partner at Heathrow, while one or more Middle East carriers might also be keen.
Virgin Atlantic’s prize assets are its brand and reputation and its slots at Heathrow. The airline is the second-largest long-haul carrier at the airport despite holding just 3% of slots to BA’s 42% and Lufthansa-owned BMI’s 11%.
Branson has long favoured a hook up with BMI’s short-haul network to feed passengers to Virgin’s long-haul flights. However, Lufthansa’s interest appears to be elsewhere.
Branson was speaking in Toulouse where Virgin America – in which Virgin Group owns a 25% stake - announced an order to buy 60 Airbus A320 aircraft.