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For Virgin Atlantic, the deal would give it a competitive edge against its financially stronger rivals. The airline does not belong to any of the three major alliances, Star, American Airlines’ Oneworld, or Delta’s Sky Team. The acquisition by Delta would incorporate Virgin into its partnership with Air France KLM, and therefore help the airline coordinate flights and cut costs. The alliance would also help alleviate Virgin Atlantic’s tough financial condition. In the year ended in February, the company reported a loss of 80 million pounds, or $128 million.
While Virgin Group has shown an interest in the Delta deal, its founder Richard Branson has said the company will keep its 51 percent stake in Virgin Atlantic.
CHEAT SHEET Analysis: Could this Deal Be a Positive Catalyst for Delta’s Stock?
One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. With the global economic conditions and fuel prices depressing airline profits, the deal would make both airlines more competitive. For Delta, a stake in Virgin would increase and improve its capacity to provide services abroad. In turn, the deal would give Virgin an international partner and better access to routes in the United States.
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