Delta and Virgin form air alliance
JV will offer reciprocal frequent flyer benefits
Delta Air Lines and Virgin Atlantic Airways are to form a joint venture which will offer reciprocal frequent flyer benefits.
The pair say the new JV will create an expanded trans-Atlantic network and claim it will enhance competition between the UK and North America, offering greater benefits for travellers.
The deal can be seen as a response to the agreement that Virgin’s rival BA has with American Airlines to merge UK-US routes. Consolidation of routes (and in several cases the airlines themselves) is an increasingly common feature of the industry, with commentators saying there are still too many airlines chasing too few passengers in a recession-hit sector.
Delta and Virgin Atlantic customers will be able to earn and redeem miles across Delta’s SkyMiles and Virgin Atlantic’s FlyingClub frequent flyer programmes. Premium customers also will have reciprocal access to the Delta Sky Club and Virgin Atlantic Clubhouse airport lounges.
As part of the agreement, Delta will invest US$360m in Virgin Atlantic, acquiring a 49% stake currently held by Singapore Airlines. Virgin Group and Sir Richard Branson will retain the majority 51% stake and Virgin Atlantic Airways will retain its brand and operating certificate.
The JV will operate on a “metal neutral” basis with both airlines sharing the costs and revenues from all joint venture flights.
The airlines say that enhanced benefits for customers, in addition to the reciprocal frequent flyer benefits, will include cooperation on services between New York and London, with a combined total of nine daily round-trip flights from London-Heathrow to John F. Kennedy International Airport and Newark Liberty International Airport.
There will also be shared access to Delta Sky Club and Virgin Atlantic Clubhouse airport lounges for elite passengers.
The airlines say they will file an application with the US Department of Transportation for antitrust immunity, which will allow a closer relationship and coordination on schedules and operations. The transaction also will be reviewed by the US Department of Justice and the European Union’s competition regulator and other relevant authorities. The share purchase and the joint venture are expected to be implemented by the end of 2013.
The airlines say the partnership will allow both carriers to offer a greatly expanded network at Heathrow and to overcome slot constraints, which have limited their growth and competitive capability. The two carriers will operate a total of 31 peak-day round-trip flights between the UK and North America, 23 of which operate at London-Heathrow.
In a statement the partners said: “The enlarged network will benefit customers of both carriers by providing greater access to a broader network, improved connectivity and convenient booking options.”