Will U's Future Partner Please Step Forward?

[Rob]

From the WSJ.

Virgin Group plans to take a 49% stake in the new U.S. carrier with the balance of the shares coming from equity partners, such as venture capitalists and staff, he said.

For Virgin to take a 49% interest in a US carrier requires a change in the law, not just some treaty or executive order. In this election year, with the Dems railing against outsourcing, what Congressman is going to propose such a law - let alone vote for it.

The US and EU transport folks are supposed to get together in mid-June and work out something that will make a summit meeting in late June worthwhile. They may propose such a change in the ownership limit, but it flat out won't happen during this Congress.

 

[mweiss]

What's the current ownership limit? I thought it couldn't be majority-owned by a foreign entity. Is the limit lower than that?

 

[Rob]

Current limit is 25%

 

[BoeingBoy]

mweiss,

To elaborate a little, 49% equity and 25% voting.

Jim

 

[mweiss]

Thanks, Jim.

So that would still be in line with the article. So Branson has 49% equity and 25% voting. The rest goes to US (airline, not nation) and a handful of US (nation, not airline) investors. Except for the US Airways part, as I understand it this was always the plan anyway.

 

[Rob]

. The rest goes to US (airline, not nation) and a handful of US (nation, not airline) investors. Except for the US Airways part, as I understand it this was always the plan anyway.

Thanks for the clarification about the percentages.

But of the part that would go to US (the airline), assuming US traded assets for Virgin US equity, wouldn't 75% of US's new Virgin equity holding go to pay off the ATSB-guaranteed loan?

(Sorry about all the US's in that sentence.)

Hope tomorrow is good news for everybody.

 

[BoeingBoy]

Rob,

"But of the part that would go to US (the airline), assuming US traded assets for Virgin US equity, wouldn't 75% of US's new Virgin equity holding go to pay off the ATSB-guaranteed loan?"

If it were considered an "asset sale" you appear to be right. However, if it falls under the "Merger & Consolidation" section, either U would be the surviving entity or the surviving entity (aka Virgin USA) would have to assume the ATSB loan.

Jim

 

[mweiss]

I bet it's the former. US, by being a significant shareholder in Virgin USA, would be able to claim a portion of Virgin USA's revenue as their own (this is one of the wonders of GAAP). This revenue would go first to pay off the loans. Then, once the loans are paid off, the rest is gravy.

 

[RowUnderDCA]

I just couldn't shake the feeling that something was still going on with Virgin/U.

That's why I posted on the 'where will sir richard hub?" thread: DCA.

 

[ITRADE]

Tantalizing set of rumors today. Anyhow, can't talk. Have series of meetings today.

 

[N628AU]

I believe this is the article in question:

NYT Article

Jim

I saw US Airways mentioned once, and it was a single person's opinion. No wonder why MoreFactLessEmotion conveniently omitted a link to it. Maybe his user name needs to be changed to MoreFactsLessEmotionIfICanGetTheFactsTwistedToMyViewpoint?

 

[mweiss]

I saw US Airways mentioned once, and it was a single person's opinion. No wonder why MoreFactLessEmotion conveniently omitted a link to it.

Huh? What are you talking about??? He didn't even post the original article. His only point, and it sure seems to be borne out by many things Branson has said, is that Virgin USA will be a LCC.

 

[BoeingBoy]

From an updated article about Virgin's expansion plans:

" U.S. Plans

``We shouldn't have any problems in now getting the airline launched,'' Branson said. The Virgin Group will own 49 percent of the carrier will invest at least $50 million. This would rise to about $250 million under a plan to take over about a third of US Airways slots, Branson said.

``US Airways may sell off part of their assets, and they may sell it off in part cash and shares in a new company,'' Branson told journalists. ``If they were to do that, they might decide to do something with Virgin USA. US Airways do have assets we would be interested in.''

US Airways has ``an obligation to pursue strategic discussions which might benefit the company and its shareholders,'' US Airways spokesman David Castelveter said in a statement. ``We are not in any discussions with Virgin USA or any other Virgin representatives.''

Full Article Here

Jim

 

[mweiss]

``We are not in any discussions with Virgin USA or any other Virgin representatives.''

Guess that depends on what the definition of "are" are.

 

[7.5victim]

I think it's more likely that RSA would be the majority holder of VirginUSA. The slots/gates/aircraft would be of value. But one trip thru CH11 still left the company with the high labor costs. How would a second trip achieve anything? CH7 would allow RSA to reclaim the assets and use them to start VirginUSA from scratch.

Those who do not remember history are doomed to repeat it. VirginExpress was founded from the former Euro-Belgian Airlines. EBA was a failing carrier, and VirginExpress struggled until SN went under. A VirginUSA saddled with USAirways baggage would have a hard time competing against much nimbler pure startup carriers....