Delta Air Lines said it will buy almost half of Virgin Atlantic for $360 million as it seeks a bigger share of the lucrative New York-to-London travel market.
Delta plans to form a joint venture with Virgin Atlantic, where the two airlines would share money from the flights operated under the partnership. In order to coordinate the schedules of the two airlines, they'll need antitrust approval from U.S. and European regulators.
Landing rights at London's Heathrow Airport are limited. So buying part of Virgin Atlantic is a way for Delta to get a bigger piece of the travel market between Heathrow and the U.S. Currently, Delta has fewer flights from the New York area to Heathrow than either American or United, its main U.S. competitors.
If the plan is approved, Delta and Virgin Atlantic would continue to fly between the U.S. and the U.K., as they do now. However, they would market the flights together and share the costs and profits.
Delta said it expects to have 31 round-trip flights between the U.K. and North America on the busiest days, including nine round-trips a day between Heathrow and John F. Kennedy International Airport in New York and Newark Liberty International Airport in New Jersey.
Heathrow is dominated by British Airways, which works closely with American Airlines. They have a total of 14 flights a day in each direction between JFK and Newark and Heathrow.
Delta is seeking something similar with Virgin Atlantic.
U.S. & World
"Our new partnership with Virgin Atlantic will strengthen both airlines and provide a more effective competitor between North America and the U.K., particularly on the New York-London route, which is the largest airline route between the U.S. and Europe," Delta CEO Richard Anderson said in a prepared statement.
Consumer expert Clark Howard told the Atlanta Journal Constitution that the deal will likely “accelerate” higher fares.
“This is about Delta being able to be more competitive for premium priced business travelers,” Howard said.
Delta is aiming to have the joint operation running by the end of 2013.
Sir Richard Branson will still own more than half of Virgin Atlantic, which will continue to fly as a separate airline under its own name. In 2000, Branson sold a stake to Singapore Airlines for 600.3 million pounds, or about $960 million at the time. That's the share that Delta intends to buy.
Virgin Atlantic has struggled with losses and said in 2010 that it might be interested in some kind of tie-up with another airline. British media reports at that time said that Delta was interested.
