DOT Tentatively Approves Delta-Virgin Joint Venture

The U.S. Department of Transportation tentatively approved an antitrust-immune joint venture between Delta Air Lines and Virgin Atlantic, concluding "the alliance will be procompetitive."

The Aug. 30 approval came ahead of DOT's Nov. 30 deadline for a decision and met timelines shared by the airlines, which plan to launch the joint venture "by the beginning of next year," according to a June interview with Virgin Atlantic CEO Craig Kreeger.

DOT indicated it would finalize its approval in the coming weeks, as long as public objections do not sway its decision. Antitrust immunity would shield the airlines from laws that typically prohibit carriers from coordinating on pricing, revenue management, network planning and sales.

DOT concluded that such cooperation between Delta and Virgin would benefit consumers and corporate travel buyers by strengthening competition between the United States and the United Kingdom. Specifically, DOT agreed the joint venture would establish a more viable competitor to the established joint venture between Oneworld partners American Airlines and British Airways—the powerhouse in the lucrative New York-London Heathrow market.

Indeed, Delta and Virgin Atlantic indicated "that corporate sales account managers have repeatedly turned down Delta due to its inadequate frequency level and time-of-day coverage in the New York-London market," according to DOT's approval.

DOT indicated that it expects the carriers to "maximize schedule offerings in order to attract corporate contracts and increase options for all travelers. Time-of-day coverage is a major factor in allowing airlines to gain corporate contracts, especially in large business markets. In the New York-London market, the proposed Delta-Virgin Atlantic joint venture would offer nine daily roundtrip flights between the two cities, compared to the approximately seventeen daily roundtrip flights of the Oneworld joint venture."

The carriers in December 2012 announced the deal, which included a 49 percent equity stake in Virgin purchased by Delta from previous minority owner Singapore Airlines. Delta and Virgin in April filed for antitrust immunity. European regulators and the U.S. Department of Justice already blessed the deal.