Delta and Virgin Blue’s proposed alliance has reportedly been denied by the Department of Transportation (DOT). The two agreed to an alliance last summer that would have allowed more route-scheduling flexibility and codesharing, all of which would have mitigated costs for both airlines. The alliance was approved by the Australian government in December.
The DOT, however, was not convinced that the deal offered any significant consumer benefits. According to the Associated Press (AP), “the Transportation Department said the airlines have not shown that the alliance would provide enough benefits for travelers such as lower fares or increased capacity. Also, the DOT said that Delta and Virgin Blue plan to limit their cooperation to the largest routes between the U.S. and Australia, limiting the benefit for travelers.”
The airlines have two weeks to object to the DOT’s decision.
The alliance proposal came shortly after an open skies agreement was established between the U.S. and Australia. This agreement eliminated previous restrictions on new routes between the two countries, and opened up opportunities for new codesharing deals. Since the agreement, both Delta and V Australia (which operates within the Virgin Blue group) have added routes. Part of the problem with the proposed Delta-Virgin Blue alliance is that neither Delta nor V Australia plan to add capacity beyond these routes, meaning fares will likely not change much.