June 16 (Bloomberg) -- Richard Branson said he’s prepared to reduce his stake in Virgin Atlantic Airways Ltd. to aid the U.K. carrier’s search for an alliance partner.
Branson, who owns 51 percent of Virgin Atlantic stock, said he’ll always be “a major shareholder” in the Crawley, England- based company and that his preferred option is for Singapore Airlines Ltd. to reduce its 49 percent holding.
“If I had to sell a few shares and get the right alliance for Virgin Atlantic I think I would,” the entrepreneur said today in an interview in Miami. “But it’s more likely that we’d get Singapore Airlines to sell a few of their shares and that would be the way we would sort it out going forward.”
Virgin Atlantic has hired Deutsche Bank AG to assess Virgin Atlantic’s strategic options as rivals British Airways and American Airlines boost cooperation on key trans-Atlantic routes. Branson, who founded the carrier in 1984, has said that while joining an alliance is a key consideration, it’s not yet clear whether he will sell down his majority holding.
“We’re not necessarily going to tie up with anybody,” he said today. “We’ve had approaches and if anything makes sense will tie up. I will always remain a major shareholder in this airline and all the people who’ve approached us have made it very clear that fortunately they see me as an asset.”
Virgin Atlantic is “big enough and the brand is strong enough” to be able to secure an agreement on its own terms, , Chief Executive Officer Steve Ridgway said earlier in an interview on a flight to Miami, adding that the carrier is continuing to review options.
“We would want to continue our strong distinctive identity,” he said. “The attraction of Virgin Atlantic is its brand and personality, so I don’t know why we would let it get eclipsed or why anyone would want it to be eclipsed. We’ve got a very special position and reputation in the markets we’re in.”
Virgin Atlantic needs to examine its strategy following consolidation among major rivals in the U.S. and Europe and as global alliances take on a more permanent nature, Ridgway said.
“We just want to make sure that if there are opportunities out there, there might be some for us,” he said. These things don’t happen in five minutes. It’s a pretty long process and there are a lot of hurdles to clear.”
Entry into a global alliance won’t on its own affect Virgin’s identity, he said. Alliance recruits “haven’t all dumbed themselves down,” the CEO said, citing as an example Cathay Pacific Airways Ltd., a member of the Oneworld grouping.
The SkyTeam alliance, led by Air France-KLM Group and Delta Air Lines Inc., regards Virgin Atlantic as “an interesting option,” given its “relevant position in the U.S.-U.K. market,” Managing Director Michael Wisbrun said in an e-mailed response to questions from Bloomberg News.
SkyTeam doesn’t disclose details of potential membership until an agreement has been signed, he said.
The Star Alliance, which includes Deutsche Lufthansa AG and United Airlines, could also be an option for Virgin Atlantic. Membership of Oneworld may be less likely given its rivalry with British Airways at London’s Heathrow airport.
Ridgway said that while Virgin’s brand is its strongest asset, value also lies in the carrier’s take-off and landing positions at Heathrow, which operates at 99 percent capacity.
“You couldn’t replicate the position that we have at Heathrow now, it being so full,” he said.
Virgin Atlantic said today that it will begin a new route from Europe’s biggest hub to Cancun in Mexico starting in June next year. The service will operate twice a week.
Ridgway said that a “very good recovery” in demand through most of last year has lost some of its “shine.”
“It went off a bit towards the end of the year,” he said. “The snow didn’t help, then capacity came back in. Consumer sentiment has also been tailing off a bit and since Christmas we’ve had the fuel-price increase from the ‘Arab spring’.”
Sales and pricing are strongest in premium seats, said Ridgway, who flew to Miami to commemorate the 25th anniversary of Virgin’s first service there.
“The front is performing very well,” the executive said. “Upper class is performing very well and it’s a good old battleground in the back.”
Ridgway said he’s hopeful that a strike by Virgin Atlantic flight crew over pay can be avoided. The British Airline Pilots Association is currently polling members on industrial action at the carrier, with the result of the ballot due next week.
“Everybody is very clear that we need to reach an agreement,” he said. “Both sides are very motivated to get a resolution. I know they don’t want to go on strike.”
Ridgway said there had been talks between the sides after Balpa rejected an offer to lift wages 4 percent this year and 3 percent next year and in 2013. The union said May 16 it turned down the proposal because pilots haven’t had a raise since 2008 and U.K. inflation is forecast to breach 5 percent this year.
A walkout could start in late June or early July, including a one-week notice period required by U.K. labor law, should a ballot that began on May 24 return a “yes” vote.
--Editors: Chris Jasper, Chad Thomas.
To contact the reporters on this story: Steven Rothwell in London at firstname.lastname@example.org
To contact the editors responsible for this story: Chad Thomas at email@example.com