Virgin Atlantic Will Join an Alliance Soon, Says Richard Branson
Virgin Atlantic Airways, the last big trans-Atlantic carrier to remain independent of the three airline alliances that define the industry, will join one in the near future, Virgin founder Richard Branson tells Forbes. “There is likely to be an announcement of an alliance coming very soon,” he says.
Virgin has stayed out of the alliance system until now, preferring to write bilateral codesharing agreements with other airlines. Branson declined to say which alliance Virgin would join, but it is unlikely to be OneWorld, the group that includes Virgin arch-competitor British Airways. That leaves Star Alliance, anchored by United Continental Holdings and Lufthansa, or SkyTeam, anchored by Delta Air Lines and Air France-KLM, as possibilities. Of those two, Virgin Atlantic’s operations are more closely aligned with Star Alliance: the airline is 49% owned by Star Alliance carrier Singapore Airlines, has expressed interest in buying BMI from Lufthansa, and includes nine Star Alliance members among its partners.
In late 2010, Virgin Atlantic hired Deutsche Bank to advise it on merger possibilities. Sky News reported that Delta had hired Goldman Sachs to help it woo Virgin, but that attempt, along with efforts by some other airlines, appears to have fizzled. Yesterday Virgin Atlantic confirmed that it was interested in merging with BMI, another airline with a hub at Heathrow.
A Virgin Atlantic spokeswoman declined to comment on the airline’s alliance talks, writing in a statement that “Deutsche Bank is looking at all our options, which includes the world of alliances. We are one of the very last independent carriers with an unrivaled position in the industry which is why we are carrying out this strategic review.”
Virgin Atlantic was one of four airlines allowed to fly between London’s Heathrow airport and the United States until the EU-US Open Skies agreement opened those routes to competition in 2008. Its market position has been further challenged by a new round of consolidation in the airline industry–particularly a 2010 agreement between American Airlines, British Airways and Iberia that coordinates those carriers’ trans-Atlantic service. Membership in an alliance could feed traffic into Virgin’s network and give it a boost with business travelers who try to keep their frequent-flier earnings consolidated within an alliance to enjoy perks like free upgrades to first class and access to departure lounges.
Virgin Atlantic Will Join an Alliance Soon, Says Richard Branson - Forbes