Fight over Virgin

International airlines jockey for more control

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published December 4, 2012 9:48 am AEDT

The fight over control of Virgin Australia Holdings (ASX: VAH) is hotting up, with news emerging that Singapore Airlines and Etihad are both looking to lift their stakes in Australia's second-largest carrier.

Singapore Airlines currently holds 10% of Virgin, while Etihad has 8.2%, and Air New Zealand (ASX: AIZ) has a 20% stake. The speculation follows Singapore Airlines confirming that it is in talks to sell all or part of its 49% stake in British airline Virgin Atlantic to US carrier, Delta, as it bids for a greater focus on the Asia-Pacific region.

According to a report in today's Sydney Morning Herald (SMH), Singapore gained a 10% stake last month and is likely to raise its holding further. Singapore, Etihad and Air NZ have no seats on the board of Virgin, with the company saying that could lead to a 'shambolic situation'. But Virgin is going to have to spend a fair amount of time managing these sizeable shareholders, because they have no board representation.

Sir Richard Branson's Virgin Group holds a 23.5% stake in Virgin, but is unlikely to sell his stake, unless it's at a significant premium to the current share price of 44 cents.

With Virgin Australia reshaping itself as an upmarket competitor to Qantas Airways Limited (ASX: QAN), Mr Branson is likely looking for the company to gain market share, and increasing its revenues and profits.

Virgin recently announced that it had taken a 60% stake in budget airline, Tiger Airways Australia, and a full takeover over of regional flyer Skywest Airlines (ASX: SXR), as it ramps up its assault on Qantas's Jetstar and Qantas Link businesses.

Foolish takeaway

The tug-of-war over Virgin continues and it seems Virgin's turbulent history is far from over. Once majority owned by Patrick Corporation and then Toll Holdings Limited (ASX: TOL), Virgin looks to be the plaything of major airlines this time.

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Motley Fool writer/analyst Mike King doesn't own shares in any company mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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