Virgin Atlantic Sells Flat-Bed Seat Unit After Patent Row

Richard Branson’s Virgin Atlantic Airways Ltd. plans to exit aircraft seat production after losing a six-year legal battle over the patent on its premium berths.

Virgin agreed to sell the engineering department of its Threesixty Aerospace unit to Zodiac Aerospace SA after the U.K. Supreme Court ruled that the French company -- the world’s biggest maker of aircraft seats -- isn’t liable for 49 million pounds ($75 million) in damages sought by the airline. The disposal is not directly linked to the ruling, Virgin said.

Founded as Reynard Aviation in 1998 to help Virgin compete with new products from British Airways, Threesixty worked with Contour Premium Aircraft Seating to produce the J2000 berth and its successor, the flat-bed Upper Class Suite. A rift developed when Contour, later bought by Zodiac, sought to supply seats of a similar design to carriers including Delta Air Lines Inc.

“The business needs to focus on what it does best, which is designing and delivering products that our passengers love,” Virgin said in an e-mailed statement. “It is not a core part of our business to also manufacture those products, and therefore we have taken the decision to transfer the undertakings.”

Key Battleground

Zodiac said separately that the purchase, for which it didn’t disclose a value, involves activities at Threesixty employing about 20 people. That’s after 50 employees at the unit were let go earlier this year, according to Virgin, which said the unit will now lie dormant, though manufacturing, supply and operational rights will be retained.

Premium seats have become a key battleground for carriers seeking a bigger slice of the long-haul corporate travel market, which accounts for the bulk of industry earnings. Lie-flat berths were pioneered by British Airways in first class in 1996 and extended to its business cabins three years later, with full-service rivals including Virgin following suit.

“The seat product is absolutely critical and there are a lot of airlines that really want to differentiate on that product,” said John Tighe, Design Director at James Park Associates in London, which has designed berths for carriers including Singapore Airlines Ltd. “The competition has stepped up and the whole market has become far more developed.”

‘Strong Decisions’

Britain’s highest court ruled yesterday that Zodiac Seats U.K. Ltd. of Cwmbran, Wales, isn’t liable for damages even after an earlier hearing found in Virgin’s favor. That’s because the carrier amended the patent on its Upper Class seats following the original decision in the wake of a European Patent Office decree that went against the U.K. judgment.

“Zodiac are entitled to rely on the amendment of Virgin’s patent in answer to their claim for damages on the enquiry,” Judge Jonathan Sumption said in the written ruling.

The legal wrangle began in 2007 against multiple defendants including Delta, now the leading shareholder in Virgin Atlantic after the purchase of a 49 percent stake for $360 million.

Virgin said in its statement that a turnaround plan aimed at delivering a profit by spring 2015 is the key focus for Chief Executive Officer Craig Kreeger, who took over on Feb. 1, and that the strategy “means making strong decisions.”

Still, yesterday’s ruling covers just one element of the intellectual property dispute, Virgin spokeswoman Louise Holding said in a separate statement, adding that the carrier invests heavily in innovation to differentiate its product from rivals.

Zodiac Aerospace acquired its U.K. business via last year’s purchase of Contour from Premium Aircraft Interiors Group Ltd., owned by a Royal Bank of Scotland Group Plc investment vehicle. The company, based in Plaisir, near Paris, employs 30,000 people and has annual sales of 3.4 billion euros ($4.4 billion).

(Updates with company comment in second paragraph, aircraft-interiors design specialist in seventh.)
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