Delta and Virgin Atlantic File Antitrust Immunity Application

New business partners, US carrier Delta Air Lines and UK operator Virgin Atlantic Airways, have filed an application with the US Department of Transportation seeking antitrust immunity for their new joint venture on flights between North America and the United Kingdom.  The filing marks a significant milestone in the creation of the joint venture which will play a role in further increasing competition in critical transatlantic business markets and follows Delta’s acquisition of a 49 per cent equity stake in Virgin Atlantic’s parent company last year.

The partnership will allow Delta and Virgin Atlantic to be more effective competitors on routes between North America and the UK, particularly between the US and London, by expanding the quantity and quality of travel options for customers of both airlines.  If antitrust immunity is approved, Delta plans to begin a new non-stop service between Seattle and London Heathrow, expanding competition in an important business market.  The new service would complement Delta’s growing international gateway in Seattle and bring competition to a route served only by British Airways.

In their filing, Delta and Virgin Atlantic noted that nearly 60 per cent of the slots at London Heathrow Airport are controlled by the American Airlines/British Airways joint venture which, as a result, dominates air travel between the US and the UK, including the New York - London market, which is the most important business market in the world. By combining Virgin’s Heathrow slots and UK brand strength with Delta’s powerful US network, the joint venture hopes to be able to offer significant competition in this market and benefit consumers on both sides of the Atlantic.

“Our proposed joint venture will mean an expanded schedule with more frequencies and destinations for customers traveling between the key business markets in the US and the UK,” said Ed Bastian, President, Delta Air Lines.  “Approval of antitrust immunity would allow travelers to take full advantage of all the aspects of the Delta-Virgin joint venture and enjoy the benefits of increased competition, particularly on flights to and from London Heathrow Airport.”

Under the proposed joint venture, Delta and Virgin Atlantic would coordinate schedules, network planning, pricing and revenue management functions, sales and other aspects of their services between North America and the UK Through the joint venture, the carriers would together offer a greatly expanded network at Heathrow despite slot constraints, which have limited the growth of both airlines in the UK – North America market. The two carriers would operate a total of 31 peak-day round-trip flights between the UK and North America, 23 of which would operate at London Heathrow.

“Our filing for antitrust immunity marks the next step towards the full implementation of this joint venture between two great airline brands,” said Craig Kreeger, Chief Executive, Virgin Atlantic.  “Consumers will reap the rewards of this joint venture on services between the UK and the United States, Canada and Mexico through a shared ethos in the highest standards of customer service and much more effective competition to and from Heathrow.  We are confident that the DOT will recognise this consumer benefit.”

The two carriers suggest an enlarged joint network will benefit customers of both carriers by providing greater access to key markets, improved connectivity and convenient booking options.  The airlines plan to implement codesharing, frequent flier program reciprocity and shared lounge access.  Delta already operates a transatlantic joint venture with Air France-KLM and Alitalia.  In their filing, the airlines are also seeking antitrust immunity for five-way coordination on UK – North America traffic flows among Delta, Virgin Atlantic, Air France, KLM and Alitalia to facilitate the effective operation of the two joint ventures.

Although these joint ventures partly exist on the connection opportunities they provide on either side of the Atlantic, we look in greater detail at the O&D demand between the UK and USA over the past five years and the principal operators in this market.  In 2012, approximately 13.36 million bi-directional O&D passengers flew between the two countries, down 1.7 per cent on the previous year. 

Virgin Atlantic last year had a 22.1 per cent share of the O&D traffic and when combined with Delta, ranked fifth with an 8.6 per cent share, the total figure rises to 30.7 per cent.  This compares with the 42.3 per cent existing share from the combined oneworld partners American Airlines and British Airways, a figure that rose from 39.6 per cent the previous year. 

ESTIMATED DEMAND BETWEEN UK AND USA (annual bi-directional O&D passengers)

Year

Estimated O&D Passengers

% Change

Leading Operators

2012

13,363,757

(-1.7) %

BA (30.3%), VS (22.1%), UA (13.1%), AA (12.0%), DL (8.6%)

2011

13,599,717

3.1 %

BA (27.7%), VS (22.0%), AA (11.9%), DL (9.9%), CO (8.4%)

2010

13,194,385

(-0.2) %

BA (27.0%), VS (22.0%), AA (13.6%), CO (9.8%), UA (8.5%)

2009

13,225,410

(-11.8) %

BA (27.4%), VS (22.1%), AA (12.6%), CO (9.9%), UA (8.1%)

2008

14,998,532

(-2.1) %

BA (27.2%), VS (20.0%), AA (12.9%), CO (9.0%), UA (7.5%)

Airline Codes – BA: British Airways; VS: Virgin Atlantic; UA: United; AA: American Airlines; DL: Delta Air Lines; CO: Continental Airlines