Virgin Atlantic

[Artie Fufkin]

I stand to be corrected, but the 49% rule is only there for reasons of cabotage.

A US company can buy out an EU company in other industries, but in aviation, it is impossible because under the open skies deal a US airline cannot fly internal EU flights or flights starting in the EU and going to anywhere other than the U.S. If all VA flights start in the EU and go exclusively to US, what is there to stop a takeover?

This is quite clearly the way VA is being reorganised. Get all flights to run London-US, take over, shut down unnecessary London offices, make all UK staff redundant, replace with US pilots, cabin crew and engineers.

[22/04]

What you are effectively saying is that Delta will buy VS out for its London slots.

But it wouldn't get all of them would it? like BA didn't get all of BMIs.

I suspect no one has quite decided this yet -it is most likely if VS can't be made profitable.

What DL have with VS now is a North Atlantic joint venture- I am sure that will be the focus of the VS strategy and will have to make money.

The crunch will be to see what they do as others say with the holiday business- they could keep Orlando and Las Vegas but ditch/sell the Caribbean routes - they certainly don't fit in with the rest of the operation.

If they ditch Shanghai for a US destination (and I think they will - national CC have apparently been put on to different contracts) - that doesn't tell us much- just more expansion of Joint Venture to say Minneapolis/St.Paul or Cleveland.

If they ditch routes where the slots are pretty useless for the US; Dubai, Delhi and Lagos and to some extent Jo'Burg then we will know the rumours are true. There will then be only one place it can all end.

[BasilBush]

There's no reason why DL wouldn't get to keep all of VS's LHR slots. The comparison with BA/BMI doesn't apply - BA had to give up some slots as they ended up being the sole operator on a number of routes, giving them a monopoly. Unless I'm mistaken there are no routes on which DL/VS have no competition ex-LHR.

It must be quite a tempting proposition for DL.

[EK77WNCL]

It would be a TERRIBLE shame if DL bought them out fully and I hope everyone with the power to do so stops it happening! I for one don't want EU aviation to turn into the shambles the US has, perpetual mergers, petty, greedy management and fifty-odd <50 seaters flying between anywhere and everywhere all day.

[Skipness One Echo]

It would be a failure on SRB's part to see Virgin Atlantic taken apart. He has to actively want to sell out and after the failure of Virgin Galactic, I doubt he'd want the publicity of pluckly lil VS fighting BA giving way to tiny little VS eaten by American giant.

[Fairdealfrank]

It would be a failure on SRB's part to see Virgin Atlantic taken apart. He has to actively want to sell out and after the failure of Virgin Galactic, I doubt he'd want the publicity of pluckly lil VS fighting BA giving way to tiny little VS eaten by American giant.

Looking at it from the outside with no axe to grind, it does appear to be the case that efforts were on concentrated on an unwinnable war against BA rather than on the development and profitability of VS.

First law of common sense? Don't fight battles that can't be won. There's no point.

Also, had allegedly puerile personality clashes been put to one side, maybe there could have been a deal/collaboration between BD and VS all those years ago, and both might still be thriving carriers.

Let's face it, their route networks perfectly complimented eachother, and this would have been the way to give BA a "run for its money" at LHR.

[Omnipresent]

It will be interesting to see what happens with the Summer 2016 schedule which should be announced sometime after September 2015. Will we see more non-North Atlantic routes go to add transatlantic capacity?

Regarding spinning off Virgin Holidays and the LGW routes, this was one option mentioned when Virgin was actively seeking a buyer for Singapore Airlines' stake.

[SWBKCB]

I would expect the 49% ownership rule to apply irrespective of the routes to be flown (i.e. US only).

[BasilBush]

The relevance of the 49% ownership restriction is that any higher non-EU stake would result in the airline ceasing to qualify as an EU- owned carrier. This is important under most bilateral agreements, where an airline has to be owned by either of the two parties to the bilateral. But if DL were to buy out Branson then the airline would still qualify under the EU/US bilateral, as a US carrier.

As for Branson's intentions, who knows. But it's simply wrong to say that he has never indicated any intention to sell. Back in 2010 he appointed Deutsche Bank to assess all options for the future of VS, including the possible sale of his 51% stake. His actions in selling out of other Virgin ventures (endless list...) shows that money talks. If DL were to offer an attractive price I'm sure he'd swallow his pride - as he has had to with Little Red.

[WHBM]

Delta puts restrictions on Virgin sizing


Delta Strikes Pilot Deal to Keep Jobs From Outsourcing to Virgin - Bloomberg


Delta can negotiate what they wish with their pilot groups, but it seems to me that this restriction of the airline of one country on an airline of the other country is not permissible under the Open Skies agreement.

"The union sought to protect the bulk of Delta’s U.K.-U.S. flying and ensure that Virgin doesn’t erode operations on other routes around the world."

No, Open Skies means you can't do that. Let's see if the CAA can be bothered to do anything about it though

[EI-BUD]

EK77WNCL,
It would be a TERRIBLE shame if DL bought them out fully and I hope everyone with the power to do so stops it happening! I for one don't want EU aviation to turn into the shambles the US has, perpetual mergers, petty, greedy management and fifty-odd <50 seaters flying between anywhere and everywhere all day.

Firstly to say US aviation has come through the ringer and post some serious consolidation the remaining big carriers are now operating on a sustainable footing. The enormity of the losses in the past was no way sustainable for the long term. A range of loco's are in the fold too, so competition does exist and these loco's are on the rise.

EU aviation is headed in the very same direction as the U.S. in the recent years. In the EU The number of carriers has declined massively and in the UK we had scores of airlines, but now we have a few big ones and a few small ones.

Unfortunately 'perpetual mergers' make commercial sense!!!

[PAXboy]

EI-BUD is correct about USA consolidation and Europe has a lot further to go. Sadly, VS is a spent force and will (now) remain a niche player. The failure of Branson and Bishop to do a deal in the 1990s (whose ever fault it was, let's assume it was 50/50) was the point at which VS could have become a real player but it failed and one carrier is gone and the other a shadow.

This only serves to emphasise the importance of consolidation.

(I've never worked for VS but am a satisfied customer of many years)

[CabinCrewe]

yes BD and a limited longhaul connecting network was going to be a rip roaring success.... BA would have had them for breakfast, dirty tricks or otherwise.

[Fairdealfrank]

Delta can negotiate what they wish with their pilot groups, but it seems to me that this restriction of the airline of one country on an airline of the other country is not permissible under the Open Skies agreement.

Yes, it's also not a good idea to make oneself a hostage to fortune, in the sense of tieing DL's rate of growth to that of VS's.

EI-BUD is correct about USA consolidation and Europe has a lot further to go. Sadly, VS is a spent force and will (now) remain a niche player. The failure of Branson and Bishop to do a deal in the 1990s (whose ever fault it was, let's assume it was 50/50) was the point at which VS could have become a real player but it failed and one carrier is gone and the other a shadow.

This only serves to emphasise the importance of consolidation.

(I've never worked for VS but am a satisfied customer of many years)

Indeed, a point made in post 788.

yes BD and a limited longhaul connecting network was going to be a rip roaring success.... BA would have had them for breakfast, dirty tricks or otherwise.

As independent entities possibly, but with BD as part of the Star Alliance, with other Star Alliance longhaul and shorthaul feed, a more comprehensive BD/VS collaboration may well have worked well at LHR.

Not big enough to make BA/One World lose any sleep, perhaps, but enough to provide viable competition and choice to pax.

But we'll never know for sure.

[WHBM]

Originally Posted by Fairdealfrank

As independent entities possibly, but with BD as part of the Star Alliance, with other Star Alliance longhaul and shorthaul feed, a more comprehensive BD/VS collaboration may well have worked well at LHR.

One of the principal reasons for BMI's ultimate collapse was the extent of Star Alliance operations into Heathrow, both European and long-haul, and the sheer number of connecting passengers delivered by such carriers onto BMI domestic and short-haul flights. With the way that revenue attribution works for splitting out revenue between carriers on connections, BMI was getting just not enough to cover costs. Star Alliance was a real revenue One-Way Street benefitting the overseas carriers and disadvantaging BMI.


It wasn't/isn't an issue for BA connecting onto comparable routes, because BA with a full long-haul programme can collect 100% of the revenue, and how it is split up is just a matter for internal accounting. Further, BA's marketing etc generally ensured that the bulk of the connecting passengers on UK domestic flights were going on by BA, the number of other OneWorld connections onto American, Cathay, etc, is just a small fraction of what BMI was getting stuck with.

[EI-BUD]

The debate about bmi and Virgin being the perfect match has been debated long and hard and would have had its merits. The networks and operations would have been complimentary. However, the issue is one of scale. Even a combined bmi and Virgin would still have been small by comparison to BA.

Range of destinations ex London, range of airports ex London, generally scale of frequency of departures ex London and a good product to boot would always have given BA the edge. And it is working.

Sadly for the history books as another airline is gone. The upside here is that for Virgin, it has a strong backer and the brand is in demand. Lets hope it sticks around for the long haul, pardon the pun...

[Peter47]

DL can't acquire any more of DL but there is no reason why AFKLM couldn't acquire the 51% & effectively outsource the management to DL (although there is still the question of whether that would be considered as EU control). Would a DL manager who is an EU citizen be OK?

As far as the ALPA scope acreement is concerned, I would imagine in any case that a VA pilot could only fly DL metal if a US citizen but a scope agreement forcing DL pilots to fly DL metal is enforecable although may need to work for the next contract to be signed. Similarly DL & VS can agree on broadly a 50/50 split or whatever on their joint venture between the UK & US - isn't that what KL & DL (and before them NW did between the NL & US)? BALPA could probabaly go to a UK court and argue that any scope argeement limiting the amount of non US flying VS could do was illegal - isn't that why EU airlines must be 51% owned by EU citizens?

(I'd like to know what BALPA would think if the Allied Pilots Association tried ti limit the size of BA's operations to that of AA.)

[Peter47]

One further thought, might it be worth VS splitting itself into two, one serving the US & one to serve other routes. They could share certain support operations such as maintenance. Not sure who would own any minority stake in the latter - ASKLM?

Ant thoughts?

[Fairdealfrank]

As far as the ALPA scope acreement is concerned, I would imagine in any case that a VA pilot could only fly DL metal if a US citizen but a scope agreement forcing DL pilots to fly DL metal is enforecable although may need to work for the next contract to be signed. Similarly DL & VS can agree on broadly a 50/50 split or whatever on their joint venture between the UK & US - isn't that what KL & DL (and before them NW did between the NL & US)? BALPA could probabaly go to a UK court and argue that any scope argeement limiting the amount of non US flying VS could do was illegal - isn't that why EU airlines must be 51% owned by EU citizens?

(I'd like to know what BALPA would think if the Allied Pilots Association tried ti limit the size of BA's operations to that of AA.)

There is a difference: AA don't own 49% of BA.

DL can't acquire any more of DL but there is no reason why AFKLM couldn't acquire the 51% & effectively outsource the management to DL (although there is still the question of whether that would be considered as EU control). Would a DL manager who is an EU citizen be OK?

One further thought, might it be worth VS splitting itself into two, one serving the US & one to serve other routes. They could share certain support operations such as maintenance. Not sure who would own any minority stake in the latter - ASKLM?

Ant thoughts?

Is AF/KL in a fit financial state to buy anything at present?

[SWBKCB]

One further thought, might it be worth VS splitting itself into two, one serving the US & one to serve other routes

If the split was to allow DL to take ownership of the "US" version, this might well run into problems with the EU as it could be seen as a way of artificially getting round the ownership laws