Virgin Atlantic and Sir Richard Branson has hired Deutsch Bank to look at all strategic options available to Virgin Atlantic and that includes what the company is potentially worth.  Virgin Atlantic is already 49% owned by Singapore Airlines and 51% by Sir Richard.  Singapore Airlines has reportedly indicated its dissatisfaction with its investment’s performance in the past.  Branson indicated last May that in light of the industry consolidation taking place, it may no longer be possible for Virgin Atlantic to remain an independent entity.

Some of the questions to be answered is whether or not Virgin is an attractive property to another airline and whether or not there are other airlines out there that might be attractive to Virgin.  Virgin had been intensely interested in purchasing the airline BMI which was ultimately bought by Lufthansa who are heavily engaged in restructuring it back to profitability.

Virgin’s problem is that of no network.  It continues to be a great value to those who wish to fly its long haul flights but it has no “feed” from destinations within Europe (and in particular the UK) to provide passengers for its long haul flights.  In addition, it does not closely cooperate with its cousins at Virgin Blue and Virgin America so that it is not accused of violating laws governing ownership and competitiveness in Australia and the US. 

One has to wonder at this point why Virgin was so against joining an alliance.  They did, at one time, have quite a bit to offer various alliances but they are a property that has already lost quite a bit of shine.  Since only one alliance has substantial penetration in the UK (Oneworld), it’s possible that Star Alliance or Sky Team could still be interested on some level.  The Star Alliance actually feels a bit more like a fit and would potentially put BMI in place to offer that necessary feed to Virgin Atlantic. 

However, this is a case where Virgin really needs to pursue this rather than the alliances.  European partners in those alliances already have the opportunity to operate in the UK as a function of being part of the European Union.  In other words, Virgin needs to sell itself if it goes this route and it can.

Virgin Atlantic is an airline that really may be running out of runway very soon.  This isn’t a move out of desperation but it is a smart move to make on their part as they could benefit from a point of view that isn’t so closely tied to the Virgin hype.

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