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Reversing a decision from last September, the U.S. Department
of Transportation this week tentatively approved antitrust immunity for Delta Air Lines and Australia's Virgin Blue Group, which includes V Australia, Virgin
Australia (recently rebranded from Virgin Blue) and Pacific Blue Airlines. Delta senior vice president of Asia Pacific Vinay
Dube told BTN senior editor Jay Boehmer that
a joint venture with Virgin would be up and running within 12 months of final
approval. "We're both very motivated," he said. Dube and Boehmer this week during Delta's global sales meeting in Orlando discussed transpacific partnerships and recovering
corporate demand in Japan. An edited transcript follows.
How quickly can you enact the joint venture with Virgin Blue once
final approval comes?
The run-up work is ongoing. The foundation to
any joint venture is the fundamental alliance stuff like code sharing,
corporate lounge access and reciprocity of frequent flyer programs. That's the
kind of stuff that we're already working on. Beyond that, the JVs typically
include some sort of financial sharing mechanism and take cooperation to the
next level—looking at schedules and fares together. That sort of stuff we just
can't do until we get actual approval. What we're doing is getting people to
meet each other, so they can put a face to the name and get to know their
counterparts. Then, once we get approval we can hit the ground running with
those other aspects.
Will this JV take the same approach to joint corporate sales and
contracting that we've seen between Delta and Air France-KLM on the Atlantic?
I don't think there's a one-size-fits-all,
because the size and shape of the transatlantic business is very different from
what we've got between the U.S. and Australia and the South Pacific. You can
expect some differences, but by and large for the corporate traffic, it will be
Is corporate demand returning to Japan?
We saw a pretty sharp
decline in corporate traffic. We think we've seen the bottom of that curve.
Booking across all sectors to and from Japan is very much on the upswing. In
terms of corporate demand, the downturn was primarily on traffic to and from
Tokyo. We think Nagoya and Osaka held up pretty well. As word starts getting
out to corporate America that the level of risk—as we've been advised by the
U.S. government and atomic agencies around the world—is very, very low, we
think we'll see traffic rebound even more sharply. We're on the upswing today
because most people understand and are able to feel safe.
Clearly, all of our
flights from the U.S. to Korea, China and Hong Kong continued to hold up and
continued to see an uptick in travel demand. The trends we saw in 2010
continued into 2011.
Like your competitors, Delta made some capacity cuts between the U.S. and Japan. Are those coming back?
As you can imagine, if
you have a fairly sharp decline over a six-to-eight week period, then when
bookings come back, it takes a little while for load factors to come back.
We'll have some of those temporary pull-downs in place for a little while. Some
of those will come back more quickly. For example, Haneda service [from Detroit
and Los Angeles] will come back in June. Some things will not come back as
quickly. For example, we decided to defer Guangzhou [service from Tokyo Narita]
and we'll come back to that in 2012.
Delta has antitrust immunity with Korean Air. Do you envision a
joint venture with that partner?
Ultimately, we very much expect a joint venture
to be part of that. We're two very strong franchises across the Pacific. We're
already working with them very closely today and trying to extract some of the
benefits we have with antirust immunity. That's allowed us to expand our
services into Korea, so we're already providing some of the benefits that come
with an antitrust-immunized relationship. I see a joint venture with Korean on
the horizon. I can't give you a timeframe.