Virgin moves on EuroBelgian

Richard Branson's Virgin Group is close buying 80 per cent of EuroBelgian Airlines for about pounds 43m as part of his ambition to launch a European service.

The deal is likely to reunite Mr Branson with David Bonderman, the Texan chairman of Continental Airlines and partner in Virgin's pounds 200m purchase of the UK MGM cinema chain last year.

Mr Branson confirmed yesterday that he had signed a memorandum of understanding to buy the stake from City Hotels and a group of private investors. Virgin's expansion of EBA, a charter operation, may include operating scheduled services from London City Airport.

It is believed that Mr Bonderman would take a large stake but the deal is not thought to be dependent on his participation.

Virgin believes it can operate more efficiently than many of Europe's state-aided airlines by modelling itself on US low-cost commuter services, like Mr Bonderman's own Continental Express.

Virgin is talking to British Aerospace, Airbus, Fokker and Boeing about buying regional jets to expand EBA, which was described as a profitable, low-cost operation carrying 1.5 million passengers in 1995.

EBA operates 11 Boeing 737s plying about four charter routes, including to Madrid and Milan. Virgin intends to add another seven-10 routes, and build scheduled services, but the company would not put on figure on the likely investment.

"The agreement between the parties is still subject to due diligence, board approvals and all government approvals," the company said. Operating from London City Airport was being considered, but nothing had been decided.

Virgin said the new business would be owned by a newly created company, Virgin European Airways.