Richard Branson cedes control of Virgin Atlantic

Tycoon to stay on as chairman after selling 31% stake to Air France-KLM in deal worth £220m

The potential end of an era looms in British aviation after Sir Richard Branson announced he is selling 31% of Virgin Atlantic, relinquishing his controlling interest in the airline he founded in 1984.

Branson will net £220m from the deal to sell the 31% stake to Air France-KLM and remain as chairman of the airline. He retains a 20% interest, leaving the US giant Delta as the largest shareholder in Virgin Atlantic with 49%.

Virgin Atlantic is expected to retain its independence as a UK airline and will continue to fly under the Virgin brand.

The deal forms part of an extensive tie-up on lucrative transatlantic routes announced by Virgin, Delta and Air France-KLM on Thursday. The three airlines, along with ailing Italian carrier Alitalia, will join together in a single joint venture on flights between Europe and the US, co-operating on schedules and frequent flyer schemes – an alliance that will step up competition with the partnership between American Airlines and Branson’s great rival, British Airways.

Branson said it was “a fantastic opportunity to extend our network and create a stronger customer champion, as well as being extremely beneficial to our people and the Virgin Atlantic brand”.

The 67-year-old entrepreneur, probably the most famous face in the modern aviation industry, started out by chartering and selling seats on his first plane when a flight was cancelled in the Caribbean. He later positioned his Virgin Atlantic airline as an exciting, glamorous upstart trying to break the grip of a stuffy BA on UK aviation.

That rivalry intensified in the “dirty tricks” battle in the 1980s, which saw Branson win a large libel settlement from BA. He later presented the airline’s first tie-up with Delta, announced in 2012, as a response to the national carrier’s dominance from Heathrow to the US. Delta bought a 49% stake in Virgin in 2013 – a move that BA’s chief executive, Willie Walsh, predicted would end in Branson ceding control within five years.

Virgin Atlantic edged into profit from 2014 to 2016, but had forecast losses this year on the back of the Brexit referendum and the fall in sterling.

In a letter to staff on Thursday, Branson said it was an exciting day for the airline, and said he would still remain as the largest individual shareholder, adding that his new partners all agreed the brand should survive.

But he noted that the airline had been operating for half his lifetime, and added: “As I get a little older, I want to be certain that all the necessary building blocks are in place for Virgin Atlantic to continue to prosper and grow for the next 50 years.

Sir Richard Branson stands on the wing of a virgin airline in a mariachi uniform cradling a woman dressed in red
Sir Richard Branson marking the inaugural Virgin Atlantic Airways flight to Cancun, Mexico in 2012. Photograph: Steve Bell/Rex/Shutterstock

“The airline industry has consolidated over Virgin Atlantic’s lifetime and it’s now our turn to put ourselves at the heart of an important alliance ... With these three partners in place and with me – and one day, the wider Branson family – still very much involved, we have the foundations to make sure this is so.”

Atlanta-based Delta already had a joint venture with Air France-KLM dating back to 2009, including Alitalia from 2010.

Delta also announced on Thursday it would buy a 10% stake in Air France-KLM for €375m (£335m), as will China Eastern, with both joining the European airline conglomerate’s board, subject to regulatory approval.

Contributor

Gwyn Topham Transport correspondent

The GuardianTramp

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