Delta Air Lines, Virgin Blue plan alliance on US-Australia route

Delta Air Lines, based in Atlanta, Georgia, the United States, and Virgin Blue, based in Brisbane, Australia, are planning a joint venture in an effort to increase the reach of both airlines between the United States, Australia, and the South Pacific. The two airlines intend to file applications for antitrust immunity with the United States Department of Transportation and the Australian Competition and Consumer Commission.

In a joint statement, Delta Air Lines, the biggest airline operator in the world in terms of passenger numbers, and Virgin Blue, the second largest airline in Australia, said they were in the process of seeking regulatory approval for the joint venture.

Sir Richard Branson’s Virgin group of companies own 26 per cent of Virgin Blue.

Till the alliance is approved, the two carriers have, in the meantime, sought antitrust immunity to implement codesharing, frequent-flier programme reciprocity, and lounge-exchange rights.

Glen Hauenstein, Delta Air Lines’ executive vice-president for network and revenue management, said in a separate press release that Delta and the Virgin Blue Airlines Group combined would be a “stronger and more effective competitor” by offering their customers more choice of destinations as well as frequencies and schedules.

In 2008, Delta Air Lines had flown 121.5 million people.

According to Brett Godfrey, chief executive and co-founder of Virgin Blue, Delta Air Lines is a “good fit” for Virgin Blue and the alliance of the two carriers would ensure that “vital competition” is maintained on the trans-Pacific route.

Aviation analysts are of the opinion that “oversupply” on the trans-Pacific route has led to a price war between the four major airline operators on the route – Qantas Airways, Delta Air Lines, United Airlines, and Virgin Blue.

Financial Times quoted one aviation analyst as commenting that the proposed alliance between Delta Air Lines and Virgin Blue would, in effect, reduce the number of airlines operating on the trans-Pacific route to 3 – which, in turn, will lead to considerable decline in “aggressive pricing” as well as improvement in revenues for the airlines.

He also predicted that Qantas Airways, the flag-carrier airline of Australia, would lose in the long term if and when the Delta Air Lines-Virgin Blue alliance comes into effect.

Delta Air Lines started flying to Australia in July 2009, with daily, direct flights between Los Angeles and Sydney.

V Australia, of the Virgin Blue Group, at present operates daily, non-stop flights between Los Angeles and Sydney as well as thrice-a-week flights between Los Angeles and Brisbane. In addition, V Australia is reportedly planning to start service between Los Angeles and Melbourne in September 2009.

Meanwhile, according to reports in the media, Air New Zealand is likely to oppose strongly the plan for the Delta Air Lines-Virgin Blue alliance on the Australia-United States route.

The joint venture, when materialises, will adversely affect Air New Zealand since the alliance will include Pacific Blue, the New Zealand-based subsidiary of Virgin Blue, which operates domestic and trans-Tasman flights.

In January 2009, the Australian Competition and Consumer Commission had prevented Air New Zealand from a similar revenue-sharing pact with Air Canada.