Delta and Virgin Atlantic gain DOT Antitrust Immunity for Alliance

Delta Air Lines and Virgin Atlantic received final approval today from the US Department of Transportation for their joint venture on trans-Atlantic flights. This alliance will compete with the British Airways-American Airlines oneworld alliance in key markets such as New York-London, and improve the competitive balance in those markets. The key route for this alliance is London-New York, which is the world's richest market for premium traffic, and has long been dominated by British Airways and American Airlines. Delta and Virgin will coordinate schedules in the spring, and plan to offer 7 daily flights between New York and London, including departures from JFK at 7:40am, 6:30pm, 7:00pm, 7:30pm, 8:30pm, 9:30pm and 10:30pm going eastbound, and 9:05am, 10:15am, 11:30am, 2:00pm, 4:15pm, 5:35pm and 8:05pm going westbound. This schedule will provide a number of options for business travelers on this busy corridor, and will provide heightened competition. Virgin Atlantic has not been particularly profitable during its existence, but has been a customer service innovator. Delta, having acquired 49% of the carrier from Singapore Airlines for $360 million, has now gained a strong foothold into London Heathrow, and the ability to compete head to head for a larger share of its premium traffic. With a strong position in the New York market, Delta should be able to take market share away from British Airways and American Airlines as it increases its London flights from Boston, New York, Washington DC, Atlanta, Los Angeles, San Francisco and other markets. Currently 31 transatlantic flights will be shared, including 23 from London Heathrow airport. This joint venture will remain separate from the SkyTeam alliance, in which Delta and Air France-KLM are major partners. Virgin Atlantic is considering whether to join an alliance as a separate issue, and for the moment has deferred a decision on joining SkyTeam. We believe this joint venture, with feed traffic from Delta in the US, will strengthen both Virgin Atlantic and Delta financial performance, and expect this combination to take market share from the oneworld alliance partners BA and AA on key routes, particularly in Boston and New York.

No results