Heathrow Flight Showdown Looms as Delta-Virgin Targets NYC Route
Delta Air Lines Inc. (DAL) and Virgin Atlantic Airways Ltd. will adjust schedules between New York and London, one of the world’s busiest routes for premium travel, to help woo fliers from British Airways (IAG) and American Airlines.
With Delta’s purchase of a 49 percent stake in Virgin Atlantic completed, the carriers will use targeted advertising to win more business, Craig Kreeger, chief executive officer of Virgin Atlantic, said yesterday in an interview. Virgin Atlantic founder Richard Branson will keep his 51 percent stake.
Regulatory approval of the deal would allow an early 2014 start for a trans-Atlantic joint venture able to set timetables and fares and share costs and revenue. The tie-up challenges British Airways and American, which have long controlled more than half of New York-London flying, and United Airlines, which serves Heathrow from New Jersey’s Newark airport.
“For most of Delta’s corporate customers, this really evens the playing field with American, British Air and United as well,” Helane Becker, an analyst at Cowen & Co. in New York, said by phone yesterday.
Takeoff and landing slot times at Heathrow are fixed, although the destination cities can be altered to make a schedule more competitive, Kreeger said. Hypothetically, the carriers could swap a Heathrow-Los Angeles flight into a Heathrow-Kennedy flight if they felt it was more advantageous, he said.
“We have things we can swap, move one for another, to make a schedule work as optimally as you can,” Kreeger said yesterday by telephone.
Virgin Atlantic and Delta are “looking hard at Seattle” for new service to Heathrow, Delta President Ed Bastian said in an interview.
Delta and Virgin Atlantic, who together have nine flights between London’s Heathrow and New York’s John F. Kennedy airports, will begin placing their codes on more than 100 routes starting next month, the companies said in a statement yesterday.
North Atlantic flights generate about one-quarter of all global revenue from first- and business-class fares -- more than twice as much as second-placed trans-Pacific routes, according to figures from the International Air Transport Association.
Virgin Atlantic will place its code on 91 routes across the Atlantic and within the U.S., with Atlanta-based Delta doing likewise on 17 Virgin flights, including new shuttle services from London to Scotland, the carriers said.
Code-sharing will commence on July 3 after Delta yesterday completed its purchase of a 49 percent stake in Crawley, England-based Virgin Atlantic. The $360 million purchase was completed after last week’s regulatory approval from the U.S. Justice Department and European Commission.
Antitrust immunity is likely to be granted by the U.S. Transportation Department within months, letting the joint venture begin in the first quarter of 2014, Bastian said on a conference call.
“The DoT review of antitrust immunity is going quite well from our understanding,” Bastian told journalists. “The joint venture will be much more significant than what the code-share provides.”
Twenty-three daily code-share flights will be on North American routes from Heathrow, Europe’s busiest airport, including the nine daily services to New York.
U.S.-U.K. passenger volumes are 20 times the size of Britain-Singapore flying that former investor Singapore Airlines Ltd. (SIA) had sought to tap before the $360 million sale of its stake to Delta agreed Dec. 11, Bastian said.
Singapore Air separately said yesterday that it had completed the exit of the 49 percent holding, adding in a statement that existing commercial arrangements including code-shares and cooperation on air-mile programs and lounge access remain.
While Bastian said the primary focus will be on trans-Atlantic cooperation, Kreeger said he expects Delta to play a full part in determining strategy at the U.K. carrier.
Delta’s Executive Vice President of Network Planning Glen Hauenstein and Senior Vice President of Europe Perry Cantarutti will join Virgin Atlantic’s board and “will be involved wherever we can add value,” said Bastian, who will also join the nine-member board.
Kreeger said that though some people questioned the company’s brand identity when the Delta deal was announced, it will remain “true to its roots.”
“Our unique sense for operating an airline that customers around the world love will not change. It’s one thing that attracted Delta to us,” Kreeger said.
Bastian said he’s confident that Virgin Atlantic’s management can end losses at the U.K. company within 18 months and go on to generate positive earnings, aided by developments including an ongoing fleet-renewal process.