Branson doesn't rule out floating Virgin Atlantic

By Syed Azman and Jahabar Sadiq

PUTRAJAYA, Malaysia (Reuters) - British billionaire Richard Branson declined to rule out a stock market listing for Virgin Atlantic in the event that his Virgin Group VA.UL bought out its Singapore partner in the airline.

Virgin Group, an airlines-to-music group founded by Branson 37 years ago, may buy back the 49 percent stake held in Virgin Atlantic by Singapore Airlines (SIAL.SI), which is disappointed with the eight-year-old investment.

Branson told Reuters in an interview in Malaysia on Friday that Virgin Group had a right of first refusal over the stake, bought by Singapore Airlines for 600 million pounds ($1.21 billion) in 1999, and would be willing to match any offers for it.

That would leave the group with 100 percent of Virgin Atlantic, a position it does not normally favor.

Asked if he would list the airline in a public share offering in that case, he said: "Not for the moment, but you never know what might happen in the future."

Singapore Airlines said on Friday it was considering all its options. "Nothing is on or off the table," a spokesman said. "There's been no decision to sell."

Branson delisted the Virgin Group from the London stock market in 1988, after he became frustrated with the demands of public shareholders, but since then he has listed several subsidiaries, including Australian airline Virgin Blue (VBA.AX).

He said Virgin Group would be keen to buy out Singapore Airlines, but would also be happy if it decided to hold.

"If Singapore Airlines choose to sell their shares, we certainly could match anybody else's offer for their shares," Branson said. "And, obviously depending on price, we would be inclined to do so."

NEW LONG-HAUL VENTURE

Branson, ever master of the publicity stunt, appeared earlier at a press conference in Malaysia dressed in traditional Malay sarong and turban to announce that Virgin Group was taking a 20 percent stake in a new airline that has ambitions to become the world's top long-haul budget carrier.

Branson declined to give the value of the investment in Malaysia's AirAsia X and said the real significance was in its goal to expand the low-cost airline model.

Major low-cost airlines, such as Europe's Ryanair (RYA.I) and Easyjet (EZJ.L), have focused on short-haul routes rather than the long-haul market, where it has been assumed passengers would not want to sit for many hours on a crowded, no-frills flight.

"People have tried, people have failed. It will be a challenge to see whether this can work," Branson said.

AirAsia X, founded by former Virgin executive Tony Fernandes, said Virgin would help accelerate its growth, particularly in negotiating with airports, regulators and governments.

Branson's 23-year-old Virgin Atlantic already flies to destinations in Europe, North America, Africa and Asia.

By contrast AirAsia X is start-up operation, though it will use the same brand as its sister firm, AirAsia Bhd (AIRA.KL), Asia's largest budget carrier, also founded by major shareholder Fernandes, who once worked for Branson in Virgin Music.

AirAsia X has rights to fly to Stansted airport, a major UK hub for European low-cost flights, as well as to Australia's Gold Coast tourist mecca and to Avalon airport near Melbourne. The Australian flights are due to begin by the end of next month.

AirAsia X's parent firm, Fly Asian Xpress, has ordered 15 new Airbus A330-300 (EAD.PA) aircraft, the first to be delivered in time for the September launch. It has options on 10 more.

(Additional reporting by Jan Dahinten in Singapore)