Branson Drops Air France Deal to Keep Control of Virgin Atlantic

(Bloomberg) -- U.K. billionaire Richard Branson said he's scrapping the planned sale of a stake in Virgin Atlantic Airways Ltd. in favor of retaining control and expanding the airline he founded.

Branson has reached a deal to abandon a two-year-old plan to sell part of the airline to Air France-KLM Group and will hang on to the 31% stake, keeping a 51% holding overall, he said in a letter to staff posted on his personal blog Monday. The accord is “subject to contract,” he said.

Air France-KLM had agreed to buy the stake for about 220 million pounds ($284 million) in 2017 as part of a three-way venture with Delta Air Lines Inc., which already owned 49% of Virgin Atlantic. The revenue and cost-sharing pact is unaffected by the decision to pull the sale and will be implemented “in the near future,” Virgin said separately.

A final agreement with Air France-KLM should be reached in the next few weeks, people familiar with the negotiations told Bloomberg earlier. The Paris-based company declined to comment.

Branson last month spoke in glowing terms of Virgin Atlantic's recent progress, saying he was sad to be surrendering control of the 35-year-old company. He said at the time the step was necessary to safeguard the carrier's future in an industry increasingly dominated by a handful of airline groups.

Under Chief Executive Officer Shai Weiss, who took over in January, Virgin has resumed growth with the opening of routes to destinations including Tel Aviv and Mumbai. It has also ordered new Airbus SE A330neo aircraft and begun taking delivery of larger A350s, while purchasing regional specialist Flybe Group Plc to add vital feeder traffic.

Branson said in his letter that he'll also step up a campaign to secure enough operating slots at an expanded London Heathrow airport to establish Virgin Atlantic as a second U.K. flag-carrier to rival British Airways.

La Tribune reported on Friday that Virgin no longer wanted to sell the stake to Air France-KLM.

--With assistance from Ania Nussbaum.

To contact the reporter on this story: Christopher Jasper in London at cjasper@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tara Patel

©2019 Bloomberg L.P.