Singapore Airlines
is reviewing the future of its stake in Virgin Atlantic in a move that could lead to a £1 billion ($2 billion) sale or initial public offering, the Daily Telegraph said.The newspaper, without citing sources, said the Singapore-based carrier, the world’s biggest airline by stock market value, was in the early stages of examining options for its 49-percent stake in British entrepreneur Richard Branson’s Virgin Atlantic.

A spokesman for Singapore Airlines (SIA) declined to comment, while Virgin Atlantic could not immediately be reached for comment.

Corinne Png, an analyst at Citigroup in Singapore said any disposal of the VA stake was to be welcomed but added that the stake in the British carrier may be worth less than reported.

“We view this potential exit strategy positively as VA has not contributed significantly to SIA’s bottom-line nor network connectivity in the past 7 years, even though SIA paid a large sum for the stake,” she said in a note to investors.

Singapore Airlines stock underperformed the broader Singapore stock market, up half a percent at S$19.10. The shares have risen just over 9 percent since the start of the year.

Singapore Airlines acquired 49 percent of Virgin Atlantic for 600.25 million pounds in December 1999.

Png said that the Singapore state-controlled carrier would be able to book a “bumper disposal gain” if it could sell the stake for around 950 million pounds.

“A substantial disposal gain is likely as we believe the carrying value of VA is relatively low; SIA had previously written off 1.59 billion pounds goodwill following the acquisition.”
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