The long-rumored deal between Delta and Virgin Atlantic is now a done deal, confirmed today in news conferences on both sides of the Atlantic and press releases by both carriers.
Delta will purchase for $360 million the 49 percent stake in Virgin Atlantic currently owned by Singapore Airlines. (Singapore invested $966 million in Virgin Atlantic in 2000.)
Sir Richard Branson’s Virgin Group will retain its 51 percent controlling interest in the company.
This is not a merger—the two airlines will continue to operate separately and independently.
According to Delta’s press release, the key features of the agreement include the following:
- A fully integrated joint venture that will operate on a “metal neutral” basis with both airlines sharing the costs and revenues from all joint venture flights.
- A combined trans-Atlantic network between the United Kingdom and North America with 31 peak-day round-trip flights.
- Enhanced benefits for customers including cooperation on services between New York and London, with a combined total of nine daily round-trip flights from London-Heathrow to John F. Kennedy International Airport and Newark Liberty International Airport.
- Reciprocal frequent flyer benefits.
- Shared access to Delta Sky Club and Virgin Atlantic Clubhouse airport lounges for elite passengers.
The agreement still must be approved by U.S. and European regulators.
Assuming such approvals are forthcoming, the deal should be in place toward the end of 2013.
What It Means
The proposed joint venture for U.S.-U.K. flights means that two airlines that previously competed will be operating effectively as a single carrier. That will result in less price competition on a key international route, which can only contribute to higher airfares.
Let’s call it a negative of unknown proportions.
On the plus side, reciprocal frequent-flyer participation will increase the earning and award options for members of Delta’s SkyMiles program and for members of Virgin Atlantic’s FlyingClub program.
Other consumer benefits: more airport lounge access, and better schedule coordination between the two airlines.
Still unanswered is the question of Virgin Atlantic’s inclusion in SkyTeam, the global airline alliance of which Delta is a founding member.
Branson for many years fought doggedly to block the American-British Airways joint venture, and opposed global alliances generally, arguing that they were anti-competitive and unnecessary. He’s recently softened his rhetoric and indications are that he’s come around to the view that although global alliances may be unsavory, they are also inevitable.
This new bilateral alliance may be a step in that direction.
Reader Reality Check
Is this a meaningful development for you and your travels?
This article originally appeared on FrequentFlier.com.
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