VA hires Credit Suisse

SRB ready to take on BA

Denies current BMI/LH talks but stresses how well BMI/VS fit together.

[?]Wow

Does anyone have any ideas on how a merger would work would virgin rebrand BM to VS or would it be something totally new
Would it be a good thing or a bad thing

OMG i am starting to worry someone put my mind at rest [:(]

Steve

For discussion. I am not an economist and probably have a rather simplistic view on the matter. Please enlighten me.

Having read the article and the contents, a possible future VS tie up with BMI could be in the offing. BMI owns the second highest Heathrow take off slots behind BA. Where would Singapore airlines whom own a 49% stake in VS fit into this arrangement? Would they be reluctant to sell back to SRB?

IMHO without doubt airlines must consolidate their businesses to achieve one aim and one aim only - survival. Hence my personal thoughts that the proposed alliance between BA/AA and Iberia might not be such a bad thing. Albeit that they would in fact by default just about have monopolised the transatlantic market.

A merger between VS and BMI would give Virgin access to short haul as well as long haul markets not to mention all those additional slots at Heathrow.

If a merger went ahead would this indicate that SRB wants to have his cake and eat it?

Regards
Bryan

Originally posted by V1
OMG i am starting to worry someone put my mind at rest [:(]

Time to worry if you are an XL customer.

Increase in oil prices means that fares must increase if airlines are to stay in business.
That or decrease in costs.
Virgin is built on a quality service so decrease in costs would only be possible by economies of scale Ð but simple expansion is not a good idea in a contracting market Ð and with the credit crunch occurring at the same time as oil price increase, this is definitely a contracting market. The total number of people flying on any particular route will decrease.
Expansion by merger Ð if the companies match up Ð is definitely a contender Ð hence SRB's interest in BMI. It allows economies of scale without having to try to find new markets Ð BMI already have a strong market share.
The brand image of Virgin is very strong so I would guess that the name of any combined airline would retain the word Virgin Ð it has been suggested ÒBritish VirginÓ.

Now the other parts to the equation.
Increase in fares will decrease the numbers travelling (on top of the credit crunch decrease!)
But decrease in numbers puts costs up if you fly the same numbers of seats. The important trick is to keep the aircraft full. The all-important capacity factor.
So how can capacity be cut?
One way is simply to cancel flights Ð but that means losses of economies of scale.
A 'better' way is for someone else to cut flights on the same route.

So when Zoom goes out of business that protects the other carriers Ð such as VS Ð on that same route. VS offers deals for Zoom passengers Ð some of them will certainly book VS in the future Ð increasing capacity factor Ð decreasing costs.
If XL go under that will certainly help VS Ð XL (or their subsidiary Travel City Direct) are competitors with VS & VH on two routes to Orlando.

Its very much dog eat dog at the moment but with every threat there comes opportunity. SRB is reportedly sitting on a pile of investment capital Ð waiting for the right opportunity to acquire. The pendulum will eventually swing and then the industry will grow Ð the trick is, not just to survive, but to have enough ready cash to get in at exactly the right time Ð just before the pendulum swings back.

SRB has shown that he is quite adept as an entrepreneur Ð I watch with interest!

Thanks for that Bill[:)]

We have been travelling with VS since 1991 and in 1997 my wife and i had virgin wedding, So as a company / brand it has a special place in our hearts [:$](get the sick bags out)[:$] as it does for a lot of others on this forum . I would hate for it it to come to an end, But now i have read your post it makes a bit more sense.[y]

Steve

[Darren Wheeler]

SRB has always said that VS is his Pride and Joy so I can't see him selling the remaining 51% or giving control away to anyone.