Delta and Virgin Blue To Seek Immunity
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By Andrew Compart
Delta and the Virgin Blue Airlines Group plan to seek antitrust immunity for a joint venture on services between the U.S. and Australia and the South Pacific, which presumably would allow them to share revenue and costs as well as collaborate on items such as route and product planning.
The Virgin Blue Airlines Group includes Virgin Blue, V Australia, Pacific Blue and Polynesian Blue.
Even in advance of approval for a joint venture, Delta and the Virgin Blue Airlines Group said they plan to begin implementing code sharing, frequent flyer program reciprocity and shared airport lounge access.
The announcement by the carriers, made late on July 8, was a bit short on specifics of what the joint venture would entail. But in whatever form it stands to make the U.S.-Australia market newcomers more formidable competitors to Qantas, which still dominates the market, and United, which has a larger market share than both carriers combined.
It also might de-escalate — although probably not eliminate — the fare war that started when V Australia entered the market on Feb. 27; that’s been a boon for consumers, but damaging to route profitability for all of the U.S.-Australia carriers.
But first things first. For the joint venture to be implemented, immunity must be approved by the U.S. Transportation Dept. and Australia’s Competition and Consumer Commission.
The Centre for Asia Pacific Aviation said the proposed joint venture, “apart from enhancing the competitive position of the joint operation against Qantas,” would “perhaps take some heat out of the current price war. That is unsustainable anyway and will need to settle down eventually.”
But the CAPA added that getting a grant of immunity from both the U.S. and Australian governments “does not happen overnight and may well be circumscribed by pricing conditions in any case.” It also believes “each authority would look askance if there were any immediate hint of capacity reductions.”
Delta already has an approved transatlantic joint venture arrangement with Air France-KLM.
Both Delta and the group’s V Australia are new to the U.S.-Australia market and directly compete on one route: Los Angeles-Sydney, with daily service.
V Australia started service on the route — its first — on Feb. 27. V Australia also offers service three times a week between Los Angeles and Brisbane, and plans to begin service three times a week between Los Angeles and Melbourne in September.
Delta began its daily Los Angeles-Sydney service just days ago, on July 1. V Australia and Delta began interlining in March.
V Australia also looked to strengthen its hand by starting a frequent flyer partnership July 8 with Virgin Atlantic that lets customers earn points in either program when flying on either carrier. The two airlines said they are “working on plans” to also offer reciprocity for mileage redemption.
Virgin Atlantic has been in a frequent flyer partnership with the Virgin Blue Airlines Group’s other airlines since 2008.
In early June, V Australia and Virgin America signed and implemented an interline agreement. V Australia and Delta began interlining in March.
Photo: Delta
