The Delta-Virgin Atlantic Partnership: Implications for Frequent Business Travelers

By Jonathan Spira on 12 December 2012
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Delta Air Lines has been setting its sights on the New York market and, this week, London busit made its intentions and ambitions crystal clear.  It not only wants to own New York but it wouldn’t mind a piece of the Atlantic Ocean as well.

The airline announced earlier this month that it was bringing true lie-flat seats to its transcon flights between New York and Los Angeles, San Francisco, and Seattle.  Delta, which flies two-class Boeing 757 and 767 aircraft on these routes, will install 26 lie-flat seats on the 767 and 16 such seats on the 757.

That move puts it in even closer competition on the highly competitive transcon routes, where both American and United offer in-flight service that is along the lines of international first- and business-class services.  (Earlier this year, American announced plans to begin flying brand-new Airbus A321 aircraft with lie-flat business- and first-class seats.  In October, United announced plans to eliminate its first-class cabin on its p.s. transcon flights and add true lie-flat seats in business.)

Delta’s move in the transcon market, however, was only the opening salvo.

Yesterday, Delta and Virgin Atlantic announced the two would operate a fully-integrated joint venture in which both airlines will share the costs and revenues from all joint-venture flights.  The joint venture will offer a total of 31 round-trip flights between the United Kingdom and North America with a total of nine daily round-trip flights from Heathrow to JFK and Newark Liberty.

The partnership between Delta’s extensive New York network with Virgin Atlantic’s large London Heathrow operation, presuming it passes regulatory muster, will be extremely beneficial for the two airlines involved.  Whether or not it benefits frequent fliers, however, remains to be seen.

On the plus side, Delta fliers will be able to fly on either Delta or Virgin metal to and from London, and Virgin’s passengers will be able to easily connect to anywhere in the U.S. that Delta flies to from JFK.  London-bound passengers will be able to take advantage of Virgin’s new short-haul domestic routes that the airline announced earlier in the week.   It will also be possible to accumulate frequent-flier miles with either Delta’s SkyMiles program or Virgin’s Flying Club.

The minus side may be higher fares as a major battle surfaces between Delta/Virgin and American Airlines and British Airlines.  AA and BA are already in a well-established joint venture with anti-trust immunity and BA controls roughly 50% of the slots at Heathrow.   With the two joint ventures up and running, the number of competitors in the field is effectively reduced by two since BA and AA and Delta and Virgin will each act as one carrier, not two, on routes covered by the JV.

It’s important to keep in mind that Delta carries more traffic on routes to Europe and Asia than any other U.S. airline, despite trailing AA and United on service to Heathrow.  Indeed, as the number three contender, United, which acquired its Heathrow routes from Pan Am in 1990 (American, incidentally, acquired its London slots from TWA in 1991), will clearly be at a disadvantage in major markets such as New York.  To see how things will look after the dust settles, simply compare the number of flights from the New York metro area to Heathrow (based on today’s schedules).  Presuming the number of flights doesn’t change (and any change is unlikely, given how highly controlled Heathrow’s slots are); BA/AA will continue to lead with 14 flights a day, followed by Delta/Virgin with nine.  In third place will be United with five.

Unlike other European markets, where frequency is somewhat limited, flights to and from London and New York are plentiful and scheduled throughout the day.  Indeed, the BA/AA joint venture has more flights from New York to London than from New York to Los Angeles and San Francisco combined.  (Incidentally, there are nine non-stops from New York to LAX and four to San Francisco.)

For travelers planning their flight schedule around meetings and conferences rather than the price of an airline ticket, the difference is tremendous.  The New York-London market, which is arguably one of the most important corporate travel markets in the world, represents a significant portion of an airline’s revenue, in no small part due to the number of business travelers who are willing to pay for first- and business-class seats so they can go from airport straight to a meeting, many on a last minute (and hence higher fare) basis.



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