Branson targets international airline

SIR Richard Branson has a £300m war chest to help a multi-billion-pound swoop on distressed firms in the next few months. The cash gives him sufficient firepower for a tilt at an embattled international airline.

Branson's primary target remains BMI British Midland, and his financial muscle could yet tempt British Midland founder Sir Michael Bishop to re-enter on-off merger talks.

However Virgin is drawing up alternative plans to go after a distressed international American carrier. That possibility is contingent upon the result of ongoing Open Skies market liberalisation talks between the US and Europe.

It is thought the US government would be reluctant to fund another massive bailout of ailing carriers. It has already pumped $20bn (£12bn) into distressed airlines in the wake of 11 September, but many are still struggling.

However, the first part of Virgin's expansion plan involves buying out struggling Australian insurer AMP's 50% stake in its consumer savings unit Virgin Money. Virgin will then manage the brand, and look to outsource the financial infrastructure to Royal Bank of Scotland - which bought the Virgin One retail bank account for £100m two years ago.

The buyout is likely to cost Virgin about £45m, with talks set to start before Christmas. However Virgin has already allocated cash for that deal, and it will not eat into Branson's war chest, which is said to be squirrelled into his network of offshore Caribbean and Channel Islands-registered family trusts - the ultimate owners of much of the largely privately held Virgin empire.

Branson's financial firepower will also be enhanced by the imminent flotation of Australian carrier Virgin Blue, details of which will be published on Monday.

Branson, who raised about £100m from an agreement with Virgin Blue partner Patrick Corporation in September, will gross about A$400m (£168m), from the A$2bn float.

New threat

RICHARD Branson's cut-price Australian airline Virgin Blue is facing a new competitive threat ahead of its A$2.3bn (£960m) float, with Minardi Formula One boss Paul Stoddart revealing plans to launch a rival discount carrier as early as next year.

Stoddart, who also owns European Aviation, an air charter airline based in Bournemouth, says he is evaluating plans to operate a no-frills domestic and international airline from Melbourne's Tullamarine Airport. The move threatens to bust the Qantas-Virgin Blue duopoly in Australia and comes just weeks before Virgin Blue is due to float in Australia.