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Delta Air Lines (DAL) To Buy 49 Pct Stake In Virgin Atlantic From Singapore Airlines For $360M

 December 11, 2012 09:41 AM
 


(By Balaseshan) Delta Air Lines Inc. (NYSE: DAL) said it will purchase a 49% stake in Virgin Atlantic Airways Ltd. from Singapore Airlines for $360 million, and agreed to create an expanded trans-Atlantic network.

Virgin Group and Sir Richard Branson will retain the majority 51% stake and Virgin Atlantic Airways will retain its brand and operating certificate. Delta also will begin introducing in-flight WiFi service on international flights beginning in 2013.

Delta and Virgin Atlantic have reached an agreement for a new joint venture that will create an expanded trans-Atlantic network and enhance competition between the U.K. and North America, offering greater benefits for customers traveling on those routes.

[Related -Delta Air Lines, Inc. (NYSE: DAL): Can Airlines Continue Capacity Cuts To Improve Yields?]

A fully integrated joint venture that will operate on a "metal neutral" basis with both airlines sharing the costs and revenues from all joint venture flights. The airlines will file an application with the U.S. Department of Transportation for antitrust immunity, which will allow a closer relationship and coordination on schedules and operations.

The transaction also will be reviewed by the U.S. Department of Justice and the European Union's competition regulator and other relevant authorities. The share purchase and the joint venture are expected to be implemented by the end of 2013.

The partnership allows both carriers to offer a greatly expanded network at Heathrow and to overcome slot constraints, which have limited the growth and competitive capability of both airlines.

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The two carriers will operate a total of 31 peak-day round-trip flights between the U.K. and North America, 23 of which operate at London-Heathrow.

Virgin Atlantic has recently completed a 150 million pound sterling upgrade program. Corporate and travel agency customers of both airlines also will benefit from an aligned sales effort on both sides of the Atlantic.

DAL is trading up 2.47% at $10.39 on Tuesday. The stock has been trading between $7.83 and $12.25 for the past 52 weeks.

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