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Delta, Virgin Atlantic Ponder Merger As Airline Industry Consolidates

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Virgin America seats - Possible Delta-Virgin merger?The merger dance continues with rumors of an impending merger between Virgin Atlantic Airways and Delta Air Lines this week.

Though both Virgin and Delta are not commenting on the rumor, Virgin reported on Wednesday that the carrier has received a number of inquiries about partnerships.

Six months ago, Virgin Atlantic’s President Richard Branson hinted that the airline would be open to a potential merger. Delta has been singled out as one of several carriers considering Virgin’s proposal.

The United Kingdom-based company is trying to bulk up its trans-Atlantic fleet, especially after being left in the cold by consolidating rivals. Just recently, British Airways merged with Iberia and formed an alliance with American Airlines, strengthening its transatlantic business and threatening Virgin’s position as a carrier.

The merger talk also has some speculating that Branson, who has a 51 percent stake in the company, might be preparing to relinquish control of the Virgin Atlantic.

Delta Airlines Logo - Possible Merger With VirginHowever there are major issues around Virgin’s consolidation, chief among them being Singapore Airlines 49 percent stake in the company. Virgin would need to first get approval from Singapore airlines to merge with Delta, a move that is complicated by rival airline alliances.

Delta is a SkyTeam alliance member, while Singapore Airlines is a member of the Star Alliance. As one of the only long-haul airlines not part of any alliance, Virgin is coveted by both alliances and not likely to be let go without a fight.

Virgin is also especially desirable to the alliances because of its landing slots at Heathrow Airport. The airline is the second-largest long-haul airline flying out of Heathrow.

In addition, Singapore may be reluctant to sell their stake after airline profits went up in 2010. The company might not want to sell a Virgin now that it is finally increasing in value.

In spite of the complications, many airline analysts are calling Virgin’s move expected in light of the mega-mergers between Delta-Northwest and Continental-United. According to analysts, Virgin can no longer survive as a carrier without being part of an alliance.

By Adriana Padilla for PeterGreenberg.com.

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