Delta, Virgin Move Closer to Merger

 - July 1, 2013, 11:00 AM
Slot restrictions limit Delta Air Lines to three daily Boeing 767 flights between New York and London Heathrow. (Photo: Delta Air Lines)

Delta Air Lines and Virgin Atlantic Airways took the first step toward confronting the formidable threat of the recent British Airways-American Airlines pairing as regulators approved Delta’s acquisition of Singapore Airlines’ 49-percent stake in the UK carrier last week. The acquisition means that Virgin Atlantic and Delta have cleared a major hurdle in their effort toward forming a full joint venture, an antitrust review of which the U.S. Department of Transportation expects to complete during this year’s third quarter. The airlines hope to execute the merger during next year’s first quarter.

Following completion of last Tuesday’s deal, the airlines detailed a code-share agreement involving 108 routes offering customers seamless connections to 66 destinations across North America and the UK. Under the agreement, on July 3 Virgin Atlantic will place its code on 91 transatlantic and domestic U.S. routes operated by Delta. At the same time, the Delta code will appear on 17 Virgin Atlantic routes, including the recently launched domestic UK services connecting London with Manchester, Edinburgh and Aberdeen.

While Virgin Atlantic considers the deal vital to its aspirations to remain a major player in the transatlantic market, Delta has said its interest centers on gaining access to London Heathrow slots.

Now flying three daily departures from New York JFK to Heathrow, Delta plans to add its code to six more routes between New York and London, including four daily Virgin flights from JFK to Heathrow, and two flights from Newark to Heathrow. Apart from the flights between Heathrow and the New York-area airports, Delta will add its code to Virgin Atlantic’s Heathrow service to Los Angeles, San Francisco, Washington Dulles, Boston, Chicago, Miami and Vancouver, Canada.

Announced last December, Delta’s plans to buy Singapore’s stake in Virgin drew speculation from the likes of Willie Walsh, head of British Airways parent International Airlines Group, that the $360 million deal would eventually spell the end of the Virgin Atlantic name. In response, Branson insisted he harbored no intention of abandoning the foundation of his business empire. “First of all, ignore the press speculation, the British Airways speculation,” Branson said of December’s announcement via a video feed at the time from his Caribbean retreat on Necker Island. “I’m not going anywhere.”