SINGAPORE – The news that Singapore Airlines is reviewing its stake in Richard Branson’s Virgin Atlantic is surprising only in that it has taken SIA so long to exit the UK airline.
To great fanfare, Singapore Airlines bought its 49% stake in Virgin in 1999 for US$1.41bn. In true Branson-style, the deal was signed off on a paper napkin in a posh London restaurant.
But SIA’s stake in Virgin has never quite lived up to expectations and a sale now – which analysts predict could be worth up to US$2bn – would appear to make good commercial sense.
The SIA-Virgin link has muddied the waters in Australia, where Singapore Airlines-backed Tiger Airways is about to launch domestic services in competition to Virgin Blue – now majority owned by Toll Holdings – and Qantas-owned Jetstar.
Should SIA collect a couple of billion dollars from the sale of its Virgin Altantic stake – perhaps selling to a private equity firm – it could inject some of that money into Tiger Airways to help its battle against Qantas in Australia.
Singapore Airlines would probably enjoy that scenario – given that Qantas has lobbied successfully over a long period to persuade the Australian government to deny SIA the opportunity to fly to the US west coast from Sydney.
-by Ian Jarrett
