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Delta buys 49% stake in UK's Virgin Atlantic

Delta will pay $360 million for the stake, which will give it more access to London's lucrative Heathrow airport.

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In this photograph illustration a Virgin Airlines and Delta Airlines baggage sit together on the handle of luggage on December 11, 2012 in Manchester, England. Delta Air Lines has agreed to invest $360m (£224m) to buy the 49% stake of Singapore Airlines in Virgin Atlantic. The airlines hope the new joint venture will create an expanded trans-Atlantic network. (Christopher Furlong/AFP/Getty Images)

Delta Air Lines agreed to buy a 49 percent stake in London-based Virgin Atlantic, opening the door to the lucrative trans-Atlantic travel market.

The New York Times reports that the deal will give Delta more access to London's busiest airport - Heathrow - where takeoff and landing rights are limited because of high demand and tight capacity.

The British government has rejected plans to build a third runway at Heathrow and the airport is operating at full capacity. There is fierce competition among airlines for takeoff and landing spots. 

"Our new partnership with Virgin Atlantic will strengthen both airlines and provide a more effective competitor between North America and the UK, particularly on the New York-London route," Delta boss Richard Anderson told the BBC.

Delta and Virgin Atlantic announced they will begin a joint venture on 31 round trip daily flights between the UK and North America, the companies told Bloomberg News in a statement. 

“This is not a massive game-changer for Delta, but a nice slot-on,” James Hollins, an analyst at Investec in London told Bloomberg.

“Where Virgin struggles to compete is the sheer scale of running a trans-ocean operation, the fuel headwinds and being able to offset that when you’re a small operator.”

Delta will pay $360 million for it's 49 percent, the maximum share that can be owned by non-EU entities under British law. The stake is currently is owned by Singapore Airlines. The majority share, 51 percent, will still be owned by British tycoon and Virgin-founder Sir Richard Branson. 

The BBC reports that Singapore Airlines is selling its stake because of increased competition in the market from low-cost airlines. The airline is launching it's own low-cost carrier, Scoot, and has been investing in its regional service, SilkAir. 

The deal still must be approved by regulators in the US and the EU. 

http://www.globalpost.com/dispatch/news/business/121211/delta-buys-49-stake-uks-virgin-atlantic