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Delta Among Suitors For Virgin Atlantic Stake

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Singapore Airlines said on Monday it was in talks with interested parties to sell its 49 percent stake in British carrier Virgin Atlantic, with sources saying that Delta Air Lines was among the potential suitors.

Delta, the second-largest US airline by operating revenue after United Continental, wants to gain access to Virgin Atlantic's landing rights at London's Heathrow airport, according to two people familiar with the matter.

Delta has been looking to acquire a Virgin Atlantic stake for more than two years but previous talks broke down over price and other issues, and there is no guarantee that its recent discussions would result in a deal, the people said.

Singapore Airlines said in a brief statement it was in talks with interested parties but did not name them. It also cautioned that the discussions might not result in a deal.

The European Union requires that EU carriers be under European control, meaning Delta would need to involve an EU airline as a partner if it wanted majority control of Virgin.

Delta has been considering ways to partner with Air France-KLM, which could also take a stake in Virgin and allow the two carriers to acquire majority ownership, one of the people said. Virgin founder Richard Branson owns 51 percent of the airline.

Delta has made clear that it would like to expand at Heathrow, a lucrative airport for prized corporate passengers where landing slots are generally hard to acquire. Virgin is the second-largest carrier at Heathrow after IAG's British Airways.

Delta's SkyTeam alliance, which includes Air France and 18 other airlines, trails its oneworld and Star Alliance counterparts in slot access at Heathrow.

"Delta now finds itself going up against the combination of American Airlines and British Airways," said George Hamlin, an aviation consultant, referring to the two anchor members of the oneworld global alliance.

"British Airways brings along a feed from other destinations - both Europe and intercontinental - at Heathrow. Delta is basically a dead end at this point."

Branson, who set up Virgin Atlantic in 1984, has been weighing the airline's future for years and two years ago appointed Deutsche Bank to examine offers.

"We are always talking to many airlines on a number of different matters but we never comment on the details of these discussions," a Virgin Atlantic spokeswoman said. News of Delta's renewed interest in Virgin was first reported by the Sunday Times of London.

Heathrow, Europe's busiest airport, is operating at close to full capacity after Britain's coalition government blocked its expansion in 2010.

Virgin lost out in the battle to take over smaller UK carrier bmi last year to IAG, giving the owner of British Airways and Iberia more than 50 percent of the takeoff and landing slots at Heathrow.

However in November, Virgin won all of the Heathrow takeoff and landing slots that British Airways was forced to give up after the acquisition of bmi.

Like other European carriers such as Air France and Lufthansa, Virgin has been battered by rising fuel prices and the euro zone crisis. It posted a loss of around GBP£80 million (USD$128 million) in its last full year.

Virgin, which is looking for a new chief executive after Steve Ridgway announced he would retire early next year, is not a member of an airline alliance.

Aviation consultant Hamlin said a tie-up with Delta could give Virgin access to hundreds of markets on a one-stop connecting basis in the United States. For Delta, such a deal would help plug a weakness in its global network versus key competitors and make it a strong player at Heathrow.

"London obviously is the premier market and Heathrow is by and large the market leader. It's the lynchpin transatlantic market in terms of size and revenue, particularly premium traffic revenue," Hamlin said.

(Reuters)