America’s Delta Airlines has bought 49% of Virgin Atlantic from Singapore Airlines for $360m. The other 51% will remain in the hands of Virgin founder Richard Branson. A spat between Branson and his rival Willie Walsh, the boss of British Airways, overshadowed the deal.
Walsh said the Virgin brand will have disappeared in five years. Branson offered a £1m bet that Virgin would survive, whereupon Walsh said he didn’t have £1m, and that sum wouldn’t hurt Branson as “he’s a billionaire”. He suggested instead “a bet that would be as painful for him as it might be for me. Maybe something like a knee in the groin.”
What the commentators said Virgin Atlantic had been “stuck in a rut”, as Economist.com pointed out. It lost £80m last year and suffered a major setback when BMI, which funnelled passengers from its short-haul flights onto long-haul Virgin ones at Heathrow, was taken over by BA. The end of this “cosy arrangement” meant that “at a stroke”, around a quarter of passengers vanished and it had trouble filling seats.
The deal with Delta will help replenish the tally of connecting passengers. Moreover, both airlines will gain some slots at Heathrow and provide more competition for BA and American Airlines. With 55% of Heathrow slots, these airlines dominate the lucrative New York-London route, said Jad Mouawad in The New York Times. Virgin has just 2.3% of the slots.
The deal is “not a game-changer”, said Nils Pratley in The Guardian, but “one can understand why Walsh is annoyed by the threat of greater competition”. Still, he shouldn’t have shot his mouth off. With Branson keeping 51%, five more years of the brand “doesn’t seem a stretch”. Walsh has merely fuelled the chatter that “big, bad BA is driven mad by… Virgin”, which Branson will enjoy and milk. In any case, Walsh should have bigger issues to worry about – “such as loss-making Iberia”.