Branson Virgin vehicle to reduce Virgin Atlantic stake

The Virgin Group is to reduce still further its stake in the Virgin Atlantic airline. The sale of the 31% stake forms part of a reshuffling of the joint venture between Air France-KLM Group, Delta Air Lines and Virgin Atlantic Limited.

The three have today announced their intention to expand their strategic partnership and offer customers access to the most comprehensive transatlantic route network via an extensive joint venture.

The enhanced joint venture would establish a combined partnership with a duration of at least 15 years.

In order to support the success of that co-operation

Air France-KLM will pay £220m for the 31% stake in Virgin Atlantic held by Virgin Group
Virgin Group will retain a 20% stake and chairmanship
Delta will retain its 49% stake in Virgin Atlantic

Subject to execution

All transactions are subject to execution of definitive agreements and receipt of final shareholder, board and regulatory approvals. Virgin Atlantic will retain its independence as a UK airline with a UK operating certificate and will continue to fly under the Virgin brand.

Jean-Marc Janaillac, CEO, Air France KLM, Sir Richard Branson, Virgin group founder, Craig Kreeger, CEO, Virgin Atlantic and Ed Bastian, Delta’s CEO, had the usual range of banal, clichéd comments attributed to them in the official release. They do not merit repeating.

IAG results up

Elsewhere, on the morning that The Times told of the possible re-invention of a commercial supersonic aircraft by NASA and Lockheed Martin, International Consolidated Airlines Group (IAG) presented group consolidated results for the six months to 30 June.

Second quarter operating profit €805m before exceptional items (2016: €555m)
Passenger unit revenue for the quarter up 1.5%, up 4.0% at constant currency
Non-fuel unit costs before exceptional items for the quarter down 0.3%, up 3.5% at constant currency
Fuel unit costs before exceptional items for the quarter down 10.4%, down 13.2% at constant currency
Operating profit before exceptional items for the half year €975m (2016: €710 million), up 37.3 per cent, including the adverse foreign exchange impact for the half year of €44m
Cash of €7,944m was up €1,516m on 2016 year end
Adjusted net debt to earnings before interest, taxes, depreciation, amortisation and rent costs improved by 0.4 to 1.4 times

Willie Walsh says

IAG CEO and long-time Branson-bashing target Willie Walsh said the underlying trend in unit revenue improved, benefitting partially from Easter and a weak base last year. Non-fuel unit costs before exceptional items are up, at constant currency.

The results outline €65m of compensation fees and baggage claims related to operational disruption at British Airways due to a power failure over the second May Bank Holiday weekend, an IAG spokeswoman noted.

On the LEVEL

In June, low cost subsidiary LEVEL started long-haul flights from Barcelona to four destinations. “Sales continue to be well ahead of expectations,” said Walsh. “We've ordered three additional aircraft and are considering other European bases."

At current fuel prices and exchange rates, IAG says it expects its operating profit for 2017 to show a double-digit percentage improvement year-on-year. The group expects second half passenger unit revenue to show an increase versus last year, at constant currency.

In the wake of the results announcement, IAG shares fell by 4.5% to 589.50 (sterling-denominated) and 0.05% euro-denominated to €6.60. IAG steadfastly refuses to comment on the share price.