Blow for Branson's Virgin Blue

SIR RICHARD Branson's plan to sell a £108m controlling stake in his Australian start-up airline Virgin Blue may come to nothing after the main condition for the deal - the purchase of failed carrier Ansett - appeared to slip through Virgin's hands.

Ansett administrators have indicated that they would sell the failed airline to a rival bid by Melbourne businessmen Solomon Lew and Lindsay Fox. The Australian Government - which is subsidising benefits and pension payments for the airline's 16,000 staff - is expected to approve the deal this week.

'As far as the administrators are concerned, it's full steam ahead for the Fox-Lew bid and we are going for launch in terms of the airline and the launch date is 31 January,' said Ansett administrator Mark Korda of accountancy firm Andersen.

On Sunday, Australian stevedoring and logistics group Lang Corporation announced that it planned to take a controlling 51% stake in Virgin Blue for A$300m (£108m), but said that the investment was conditional on Virgin winning key Ansett assets, including terminal facilities. 'We think there is not much point expanding Virgin if it is not going to be able to get access to key assets that would allow it to expand rapidly,' said Lang chief executive, Chris Corrigan.

It is not known at this stage whether any of these 'key assets' would still be for sale if the Fox-Lew bid is successful, but it is unlikely. That could leave Virgin Blue still looking for the 'cornerstone investor' it is seeking ahead of a stock market listing next year. It could also leave the Virgin Group short of cash as it looks to shore up international airline Virgin Atlantic, and bankroll the launch of Virgin Mobile in the US, where it has struck a deal with Sprint.

'It should be emphasised that there has been no bid from Lang and Virgin Blue, merely an expression of interest in certain assets,' Korda said. 'The airline has been sold, subject to a number of conditions. If those conditions are not met, then we might be in a position to deal with Lang Corp.'

Shares in Lang fell 12 cents to A$10.57 in a stronger Australian market as investors factored in the new situation. Without Ansett's bricks and mortar assets, Virgin Blue is a much less attractive proposition for Lang, which has ambitions to establish a premier airfreight business.