Analyst is lukewarm about SIA’s sale of Virgin stake
Singapore Airlines may see a short-term boost if it sells its 49% Virgin Atlantic stake, but investors should remain focused on the carrier’s long-term challenges, say analysts at CIMB Research in Singapore.
SIA revealed this week it is considering a sale of its 49% Virgin Atlantic stake "to interested parties" with the US airline Delta seen as the most likely buyer.
"We see a near-term boost for SIA’s share price if this deal does go through since Virgin has not contributed markedly to SIA’s bottom line," CIMB noted.
"Longer term, however, this sale does not aid SIA in its attempt to fend off low-cost carriers or Middle Eastern carriers."
CIMB also questioned the timing of any deal. "The operating environment for airlines remains fragile, and we believe SIA may not receive full value for its Virgin Atlantic stake."
The European Union requires that EU carriers be under European control, meaning Delta would need to partner an EU airline, most likely Skyteam partner Air France/KLM, if it wanted majority control of Virgin.
In the UK, however, it is being reported that Richard Branson intends to keep his majority 51% stake in Virgin Atlantic.
Ian Jarrett
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