Things are changing at Virgin Atlantic. At the end of last month, the airline announced that it was "expanding its strategic partnership" with existing airline partners Delta and Air France KLM.
The proposed joint venture, including Alitalia, would "become the airline partnership of choice for customers, offering more than 300 daily nonstop transatlantic flights and increasing competitive routings with offerings across key business markets including Amsterdam, Atlanta, Boston, Cincinnati, Detroit, Los Angeles, London Heathrow, Minneapolis-St Paul, New York-JFK, Paris-CDG, Salt Lake City and Seattle." Virgin already operates joint venture with Delta, which has owned a 49% stake in the airline since 2012
At the same time the airline announced a proposed change in its ownership structure, with Air France KLM acquiring a 31% stake in Virgin, which values the airline at £1.1 billion. At the same time, Air France KLM announced that Delta and China Eastern would each acquire a 10% stake of that airline, increasing capital by €751 million.
The new joint venture is subject to both shareholder and regulatory approval but if it goes through as expected then what is Air France KLM (and by extension Delta and China Eastern) getting in their purchase of a chunk of Virgin?
A look at Virgin Atlantic's 2016 annual report is enlightening.
Our chart this week shows turnover and profit at the carrier for the last two years.
2017 will have been no easier, thanks to a weak pound and overcapacity on Atlantic routes — in part driven by young upstart Norwegian Airlines, which recently reported 19% year-on-year capacity growth built on its long-haul low-cost model, which is challenging Virgin and other transatlantic carriers.
It is clearly a tough time to be a British airline, particularly for one of Virgin's size, which are getting crushed between low-cost operations and the rampant Middle Eastern carriers. Joint ventures like this new proposed tie-up may be the only answer.