US Department of Transportation approves Delta-Virgin Australia JV


The US Department of Transportation (DOT) granted final approval of anti-trust immunity to the Delta-Virgin Australia trans-Pacific joint venture, clearing the way for the two companies to begin coordinating schedules and fares and for Virgin Australia to carry out its international expansion strategy.

Compass Lexecon set the annual JV consumer benefits at USD54 million, although the two carriers did not discuss the amount of benefit to their bottom lines.

The alliance, which is scheduled to become effective by the end of the year, will expand competition in the US-Australia and South Pacific markets, according to Delta. The first step is to collaborate through codesharing, product coordination and services and extending frequent flyer program benefits and lounge access for passengers of both carriers.

According to Innovata, the Australia-US route will see very little change in capacity over the next six months. Qantas (44% capacity share) and Jetstar (5.4% - eg Australia-Hawaii services) have a combined 50% share of weekly seats in the Australia-US market. Qantas mainline is growing its share to 47% in the upcoming winter schedule, while Jetstar's share will be trimmed to 4.4%. Delta (7%) and Virgin Australia (18.5%) have a combined one-quarter share of the route, while United Airlines has roughly 18%. Hawaiian Airlines' share of 6.6% currently is dropping to 4.7% in the winter schedule. The other airlines' shares are staying roughly flat.

Australia to United States capacity (seats per week, one way, 30-May-11 to 4-Dec-11)

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"This final ruling by the DOT will expand competition and enhance customer service and travel options for passengers flying between the US and Australia," said Delta CEO Richard Anderson. "We thank the DOT for their thorough review of our application and welcome their conclusion that consumers will benefit from a strong partnership between Delta and Virgin Australia."

Virgin Australia CEO John Borghetti said the ATI is a key enabler for an integrated alliance between Delta and Virgin Australia Airlines. "We are extremely pleased that the way is now cleared for us to work together with Delta Air Lines to deliver a more attractive and competitive service for travelers in Australia and North America," Borghetti said.

The airlines hope to provide more efficient scheduling with the new joint venture. The JV will combine Delta’s service to Sydney with beyond service on Virgin Australia as well as beyond service in the US to Virgin’s Los Angeles service. The antitrust immunized alliance will allow the airlines to fully cooperate on network planning and distribution.

Immunity complements the enhanced alliance between the two carriers which began in January 2010 with codesharing. In may the two expanded their codesharing to five new destinations in Australia and New Zealand to Delta's network. Delta customers can now connect in Sydney on Virgin Australia flights to Brisbane, Melbourne, Perth, Adelaide and Canberra in Australia, and to Auckland and Christchurch, New Zealand. Virgin Australia customers can connect in Los Angeles to Delta flights to San Francisco, Las Vegas, Atlanta, Detroit, New York-JFK and Orlando.

The immunity is another positive step forward for Virgin Australia's partnership strategy. See related report: Virgin Australia and Singapore Airlines to change the balance of power with long-term alliance

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