Delta Air Lines, Inc (NYSE:DAL) A Virgin Stake for Delta

Delta Alirlines

A person close to the talks has said Delta Air Lines, Inc is close to striking a deal to acquire a 49% stake in Virgin Atlantic Airways Ltd. It is a deal that would increase the US carrier’s presence at London’s congested Heathrow Airport and allow the airline to continue to offer discount-rate deals to expand its network.

The source close to the discussions has told reporters that the No. 2 US carrier by traffic is expected to acquire the stake from Singapore Airlines Ltd for between USD $300 million and $500 million and retain the Virgin brand.

By traffic Delta is already the largest US carrier on routes to Europe and Asia, but it trails longtime rivals American Airlines and United Continental Holdings, Inc (NYSE:UAL) on flights to Heathrow. As the world’s busiest international hub Heathrow is valued by carriers for a source of premium business driven by the city’s financial-services sector that it offers.

With Heathrow running at full capacity Virgin’s position as the third-largest airline at the airport affords greater access to takeoff and landing slots suitable for trans-Atlantic flights that are a highly prized commodity. Continental Airlines, a predecessor of United Continental Holdings, in 2007 paid $209 million for just four daily pairs of slots at Heathrow. Virgin controls enough slots to operate 304 flights a week.

Singapore Airlines paid USD $962 million for its Virgin stake in 1999, though it didn’t pursue integration with the UK carrier, which would remain controlled by founder Richard Branson under terms being discussed with Delta, according to the person briefed on the matter. Virgin declined to comment.

Atlanta-based Delta Air Lines, Inc held more than USD $5 billion in cash as of September 30 and has taken a unique approach in deploying resources in the industry. The company purchased an oil refinery to deak with volatility in jet-fuel prices, continues to buy or lease older, used aircraft it can park if demand declines and picked up minority stakes in two Latin American carriers—Aeroméxico and Brazil’s Gol—to command greater market share in the region.

Stock Price Performance: (30-Day) Between November 9, 2012 and December 10, 2012, Delta Air Lines, Inc (NYSE:DAL)) stock price decreased USD $0.08 (-0.7%) from USD $10.19 to $10.11.

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