Travel agents greeted news of a joint venture between Delta Air Lines and Virgin Atlantic Airways favorably, saying the agreement will result in smoother connections and service for clients, especially to London through New York.
On the downside for consumers, transatlantic airfares will become even less competitive, according to an airline analyst.
Under an agreement announced today, Delta is investing $360 million to acquire a 49% stake in Virgin Atlantic. Delta is acquiring the stake currently held by Singapore Airlines.
Virgin Group and Sir Richard Branson will retain the majority 51% stake, and Virgin Atlantic will retain its brand and operating certificate.
The joint venture, expected to be implemented by the end of 2013, will result in a combined transatlantic network between North America and the U.K., with 31 peak roundtrip flights.
Cooperation in services between New York and London will encompass nine daily roundtrips between London-Heathrow and JFK and Newark airports.
Frequent flyers of both carriers will receive reciprocal benefits, while elite passengers will have shared access to Delta Sky Club and Virgin Atlantic Clubhouse airport lounges.
The joint venture will be especially beneficial for clients transferring from domestic Delta flights to Virgin Atlantic, said Lois Howes of Superior Travel in Freeport., N.Y. Superior Travel serves a mix of corporate and leisure travelers.
“It will be a greater convenience, as you will no longer have to re-check your luggage. This will be a great thing for my clients in the Northeast flying into JFK. I’m looking forward to it.”
A boost for Delta
Howes was also happy about the fact that the venture is likely to mean a stronger position for Delta, an airline she prefers to some other top U.S. carriers.
“Anytime I can steer clients to Delta, I’m happy,” she said. “A lot of my corporate customers use Delta or Virgin Atlantic, so the fact that there are now reciprocal frequent flyer benefits is a good thing for them as well.”
Equally enthused is Philip Overton, owner of North Dallas Travel Leaders in Dallas, which also handles a mix of corporate and leisure business.
“I think it’s great – Delta is about the best domestic carrier we have in terms of customer service,” he said. “Virgin Atlantic is a good company in that regard too. So this is a good move that will benefit the public.”
Overton said he was puzzled about why the two airlines entered the agreement, particularly in view of the routes they serve. “They may be strong at slightly different airports, but much of their transatlantic routing is the same.”
More options for business travelers
"This will give the business traveler far more options," said Jennifer Wilson-Buttitieg, co-owner of Valerie Wilson Travel in New York. "Delta has huge hubs and has been investing a lot at New York airports. It gives more flight lift into a variety of places."
She also noted that Delta has a good track record in regards to previous integration with other airlines. "Delta successfully integrated with Northwest, KLM and Alitalia, so there’s no reason that this integration won’t also be successful."
The venture also means a strengthening of the SkyTeam alliance of which Delta is a member, she added. "TMCs and business travelers are incerasingly looking to airline alliances such as SkyTeam, Oneworld and Star. These partnerships mean greater access to more routes and stronger relationships."
Delta is expected to benefit from the joint venture by gaining a stronger presence in both the New York and U.K. markets, particularly in the lucrative London-New York route heavily used by business travelers.
"For Delta, this really cements their position in New York as the big carrier," airline analyst Robert Mann told Travel Market Report. "They have been engaging in the battle for New York with American and United for a couple of years. They will also come out ahead at Heathrow, pulling ahead of United there."
The partnership will “strengthen both airlines and provide a more effective competitor between North America and the U.K., particularly on the New York-London route, which is the largest airline route between the U.S. and Europe,” said Delta CEO Richard Anderson in a statement.
Virgin Atlantic chief executive Steve Ridgeway commented that the joint venture will “deliver much more effective competition at Heathrow. Customers will reap the rewards of this partnership.”
Impact on fares
However, leisure travelers shopping for cheap transatlantic airfares are not likely to reap rewards, according to Mann.
"This is one more nail in the coffin on low fares across the Atlantic," he said. "Whenever there are consolidation and anti-trust immunity alliances, the low fares go away. There will be less competitive pricing."