When news broke over the weekend about the possibility of Delta buying a large stake in Virgin Atlantic, I knew I had to get the opinion of Henry Harteveldt, co-founder of The Atmosphere Research Group, and one of the smartest people I know when it comes to the airline biz.
Here’s his take… please read it and let us know how YOU feel about the possibility of a Delta-Virgin tie up. Very exciting!
This will be one of the best pairings since ice cream and hot fudge.
Delta and Virgin Atlantic have cooperated in the past (the two had a limited code share relationship in the 1990s). Virgin Atlantic will bring both Delta and all of SkyTeam access to London– one of the most important business markets in Europe. Delta, in turn, can help generate more feed for Virgin’s flights through its JFK hub. Importantly, I think both airlines have similar, “customer first” cultures. I think Virgin Atlantic would find itself more welcome and able to have more influence in the SkyTeam alliance, which is smaller than Star Alliance.
For this deal to truly work, the two will need to secure the ability to enter into an antitrust-immunized joint venture or joint business agreement. A joint venture or joint business agreement will give the two airlines the ability to align their flights and fares, while pooling both revenues and expenses. These are common, especially between US and European airlines (American Airlines and BA have a joint business agreement).
This won’t be an easy deal to accomplish. It will have to obtain regulatory approval in both the UK and US. A key part of a deal’s success will hinge on making sure that Sir Richard Branson and Virgin Group work to facilitate a Virgin Atlantic-Delta deal. Partnering with Delta and joining an airline alliance will take Virgin Atlantic in a very different direction compared to its present state.
It’s unclear what impact, if any, this will have on Virgin America. Virgin America is an independent business unit. It doesn’t rely on Virgin Atlantic for a substantial amount of its passenger feed. It would be interesting to see if Delta will invite Virgin America to join SkyTeam, either as a full or affiliate member. A Delta-Virgin America partnership could be beneficial to Bay Area and Los Angeles Basin travelers and businesses, and enable SkyTeam to offer stronger competition in both the Bay Area and Los Angeles region.