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Delta and Virgin Atlantic?
It’s a decidedly Odd Couple pairing, the blandly generic Delta with Richard Branson’s quirky lovechild. But Delta’s 49 percent ownership stake in Virgin, completed today after last week’s approval by the EU and U.S. Department of Justice, means that henceforth — or at least until irreconcilable differences do them part — the mild-mannered Southern boy and the brash British pixie will be joined at the hip.
For travelers, the big day is July 3. That’s when reciprocal code-sharing begins, on 91 Delta routes and 17 Virgin Atlantic routes. Also beginning on that day, members of Delta’s SkyMiles program can earn miles for all Virgin Atlantic flights, and members of Virgin’s Flying Club can earn miles for Delta flights. Signifying that this is more than a casual hook-up, the miles count toward elite status. And depending on their elite status, members of one carrier’s program will receive comparable benefits when flying on the other airline.
Those are just the first steps toward a joint venture, in which the two carriers’ transatlantic flights would be jointly operated and marketed, much as American has been doing with British Airways and Iberia since 2010. The necessary regulatory approval of the joint venture is expected later this year, with joint operations beginning in early 2014.
The Alliance Question
The follow-on question raised by these developments is whether, and when, Virgin Atlantic will join the SkyTeam global alliance, of which Delta is a founding member.
The answer, according to Virgin CEO Craig Kreeger as reported in USA Today, is a definite maybe: “For now, Virgin Atlantic remains very happy with the partners we have. We’re very focused on enacting successfully the biggest partnership (Delta) we’re ever going to have. Because of the nature of our route network and customer base being so concentrated in the United States and the U.K., the Delta deal for us is the most-important thing we can do. So we’re going to take care of getting that right and working with Delta to make it successful for our customers. And, at some point in time in the future, we’ll evaluate whether SkyTeam makes sense for us.”
Stay tuned, in other words, but don’t hold your breath.
Although this stops short of a full merger, the planned joint venture is certainly fairly described as a virtual merger, which is why it will be subjected to anti-trust scrutiny. By whatever name, the Delta-Virgin Atlantic tie-up is another step toward a more consolidated, less competitive airline industry.
So although there is some upside for consumers, with more convenient schedules and richer frequent flyer program benefits, the overall trend toward increasing pricing power in the hands of fewer competitors is a negative one for consumers. Prices will rise.
Reader Reality Check
Is this a positive or a negative for you?
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