6 January 2011
Singapore Airlines’ (SIA) new CEO, Goh Choon Phong, who took over the role on 1 January 2011, stated that the carrier is reportedly considering selling its 49% stake in Virgin Atlantic. Singapore Airlines purchased its stake in Virgin Atlantic in 2000 for £600 million, with Sir Richard Branson holding the remaining 51%.
The sale of Singapore Airlines’ stake would mark the shedding of the last major remains of the carrier’s global expansion strategy as the new CEO confronts rising competition in the fast-growing yet highly competitive Asian market. Singapore Airlines’ spokesperson, Nicholas Ionides, recently stated the carrier would consider “interesting opportunities” for the stake. However, he said: “At this point no decision has been made about an immediate divestment of our stake in Virgin.” Outgoing CEO Chew Choon Seng described the investment in the UK-based carrier as “underperforming”.
The sale would allow SIA to focus on increased competition in Asia, particularly with the expansion of low cost carrier operations such as Jetstar and the AirAsia Group in the region, as well as intensifying competition in the premium market from flag carriers and the Middle East that potentially affect the carrier’s ability to attract business-class passengers. The premium market accounts for around 40% of Singapore Airlines’ revenue. Singapore Airlines also holds a 33% stake in Tiger Airways.
In mid-Dec-2010 Virgin Atlantic stated it had received a “number of lines of inquiry” about potential tie-ups after it suggested it could be interested in a merger. Media reports have stated that Delta Air Lines and unnamed Middle Eastern carriers are among the interested parties. In November 2010 the carrier appointed Deutsche Bank to assess the aviation industry and seek growth opportunities. The carrier has stated it is too early to comment on individual details. Virgin Atlantic spokesman, Greg Dawson, said Singapore Airlines was “very supportive of our business strategy, including the review by Deutsche Bank”.