Singapore Air seeks bids for Virgin Atlantic stake

Singapore Airlines (SIA), on Wednesday invited offers for its 49 percent stake in Richard Branson’s trans-Atlantic airline Virgin Atlantic VA.UL because the nine-year old investment was giving it poor returns.

Singapore Air, the world’s second-biggest airline by market value, bought the stake from British billionaire Branson in 1999 for 800 million pounds ($1.6 billion).

“It’s not a secret that we regard it as an underperforming investment. We are still reviewing our plans and are open to all reasonable offers,” Singapore Airlines Chief Executive Chew Choon Seng told a results briefing.

“But as they say in classified ads: No timewasters, please.”

State-controlled Singapore Airlines had hoped that the investment would provide it with both a financial return and better access to routes. It is not losing money on the stake.

Branson, a master of the publicity stunt, said last August that Virgin Group, his airlines-to-music group, may buy back the stake held by Singapore Air. The conglomerate has a right of first refusal and would be willing to match any offers for it, Branson had said.

Chew said Singapore Airlines faced no shareholder pressure to cut its stakes in aircraft maintenance firm SIA Engineering (SIAE) and groundhandling firm Singapore Airport Terminal Services (SATS) but was reviewing those holdings at regular intervals.

Both are still profitable, sustainable businesses and are adding value to the group. And therefore there is no pressure on us to reduce our holdings.”

No pressure on business

The carrier, Singapore’s only internationally known brand and 55 percent owned by state investment holding Temasek on Tuesday unveiled a smaller-than-expected 21 percent fall in quarterly profit and warned of slower demand due to the ongoing global market turmoil amid record fuel costs.

Chew said its forward bookings were still firm in spite of economic uncertainty. The group, which was the first airline to put the Airbus A380 superjumbo into commercial service last year, relies on business travel for about 40 percent of its revenues.

“We have seen some softening for discretionary travel out of the U.S. but not for the corporate sector as yet,” he said. “Forward bookings are still firm but these are subject to changes in corporate travel policy.”

Analysts say the airline could be hurt by a drop in business travel due to the ongoing U.S. credit crisis, after the carrier reported four consecutive months of lower passenger traffic from North America since December due to slowing demand.

In April, the International Air Transport Association slashed its 2008 profit forecast for the airline industry for the second time in four months, to reflect a deepening global economic gloom and record high fuel costs.

Singapore Air will launch on Thursday its first all-business class product, a non-stop 18-hour flight between Singapore and New York, in a bid to capture the higher-yielding business traffic.


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