Delta Air Lines, Inc. (NYSE:DAL) announced Tuesday that it is going to invest $360 million for a 49% stake in Virgin Atlantic Airways, as part of a deal that will provide Delta with more access to Heathrow Airport, where take off and landing authority is confined to limited airlines only, on account of high demand and limited capacity.
This deal will “enhance competition between the U.K. and North America, offering greater benefits for customers traveling on those routes,” says the airline, while explaining its move to acquire a stake in Virgin Atlantic.
Here it is worth mentioning that Singapore had previously acquired a stake in Virgin Atlantic for a total of $600.3 million, but the company remained dissatisfied with the returns. Whereas, two years back, when Delta Air Lines, Inc. (NYSE:DAL) decided to buy Singapore’s stake, analysts reported that the carriers could not reach a price agreement.
Today, in order to coordinate fares and flight schedules with each other, Delta Air Lines, Inc. (NYSE:DAL) and Virgin Atlantic mentioned that they would file a request for an antitrust immunity from American and European competition regulating authorities.
“The airlines will file an application with the U.S. Department of Transportation for antitrust immunity, which will allow a closer relationship and coordination on schedules and operations,” the companies said.
Delta and Virgin Atlantic Airways will also join hands in a venture that involves 31 roundtrip daily flights between the UK and North America, in competition with Delta’s biggest rival, British Airways, at Heathrow airport.
“Our new partnership with Virgin Atlantic will strengthen both airlines and provide a more effective competitor between North America and the UK, particularly on the New York-London route, which is the largest airline route between the US and Europe,” Delta Chief Executive Officer Richard Anderson said in the statement.
Virgin Atlantic Airways is going to retain its bran and operating certificate.
Despite its strong partnership with Air France- KLM, Delta Air Lines, Inc. (NYSE:DAL) has never been able to put up a strong competition in the London market. Now, with its stake in Virgin Atlantic, Delta is positive that this deal will result in more access to Heathrow Airport, which, to that extent, was otherwise not available to Delta before this acquisition.
