Delta, Virgin Atlantic to Cross-Market Flights

With Delta Air Lines' (NYSE: DAL  ) acquisition of a 49% stake in Virgin Atlantic Airways, having received regulator approval both here at home and in Europe last week, the carriers jointly announced their intention to begin cross-marketing their flights through a code-share agreement that covers 108 routes across North America and the U.K.

In code-sharing, one airline places its flight designator codes on a flight operated by another carrier, giving both airlines the opportunity to sell seating on the same flight. Thus, a passenger can buy a seat through Delta for a flight being operated by Virgin, and vice versa, giving both airlines access to a larger number of cities than they might otherwise be able to without having to increase the number of flights offered. Virtually all major airlines have code-sharing agreements in place.

Virgin will place its code on 91 Delta routes, including both trans-Atlantic and domestic routes, while Delta will place its code on 17 Virgin Atlantic routes. Although it gives Delta passengers six more daily frequencies between London to New York, Virgin fliers will now enjoy a vast network of connecting North American destinations.

Moreover, the respective loyalty programs both carriers offer, Delta's SkyMiles and Virgin's Flying Club, will now be available to passengers regardless of their flight and whether they were booked via the code-share agreement. Additional benefits include access to VIP lounges and priority check-in, boarding, baggage handling, and additional baggage allowances.

Virgin Atlantic CEO Craig Kreeger said: "As new shareholders in the airline, Delta is an important ally in the all-important trans-Atlantic market. We can stand firm together against the competition and can now offer more destinations, a smoother connecting airport experience, and ultimately the best trans-Atlantic on board experience."

The stake Delta has taken, along with the code-sharing agreement, is seen as the next stepping stone to a full joint venture between the two carriers, which they announced their intention of forming in December. They've asked the Transportation Department for antitrust immunity for the JV on nonstop routes between the U.S. and the U.K., and they expect the application review to be completed by the third quarter.

Previously they said because 60% of the slots at London Heathrow Airport are currently controlled by a joint venture of AMR's American Airlines and British Airways, they dominate air travel between the U.S. and the U.K. To allow them to coordinate their schedules and fares, those two airlines received antitrust immunity from DOT.

If approval is gained, the joint venture is expected to take flight in the first quarter of 2014.


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