Delta, Virgin Blue Seek Pact, Anti-Trust Immunity
July 09 2009 - 4:31PM
Dow Jones News
Delta Air Lines Inc. announced plans for a joint venture with
Virgin Blue Holdings in a move that could snatch Australia's
second-largest carrier from its existing partnership with United
Airlines.
The world's largest airline is also seeking antitrust approval
from regulators in the U.S. and Australia for the proposed tie-up,
the first time Delta has sought immunity for a deal outside the
global SkyTeam alliance it leads.
Delta started its first U.S.-Australia service last week,
operating on a Los Angeles to Sydney route that had long been
carved up between United, a unit of UAL Corp. (UAUA) and Qantas
Airways Ltd.
Virgin Blue also operated the route and last year signed a
code-share deal with United; each carrier sold tickets for the
other on their respective domestic networks.
United, a member of the Star Alliance, said it was premature to
comment on whether it would drop its pact with Virgin Blue.
While code-sharing has become a standard form of industry
cooperation, it is unusual for partners to switch so quickly or to
seek such deep ties outside of the network of three global
alliances that dominate the industry.
Virgin Blue is not a member of any of the global alliances, but
plans to expand beyond code-sharing through product planning and
combining frequent flyer program benefits with Delta.
Brett Godfrey, chief executive of Virgin Blue, said he had
approached Delta six months ago about cooperation, though still has
no plans to join any alliance.
He said a comprehensive marketing agreement between the two
airlines could be in place within three months and a fuller joint
venture would take six months to go through an approval process in
the U.S.
Godfrey said he expected a draft ruling from U.S. regulators
could come by year-end.
The timescale may be optimistic amid increasing scrutiny of
anti-trust exemptions in the airline industry by the U.S. Justice
Department.
While the Transportation Department has final jurisdiction over
airline applications, DOJ has been critical in recent weeks of the
other agency's stance in vetting applications for immunity.
In its filing, Delta said that "the proposed alliance is
demonstrably in the public interest because it is pro-consumer and
pro-competitive," noting the U.S. has an open skies aviation deal
with Australia.
Godfrey said that V Australia, Virgin Blue's long-haul carrier,
won't change its plans on capacity despite the arrangements with
Delta.
Delta began daily nonstop flights between Los Angeles and Sydney
on July 1. V Australia flies to Los Angeles from Sydney daily,
flies three times a week between Los Angeles and Brisbane, and will
fly three times a week from September between Los Angeles and
Melbourne.
Godfrey said the agreement with Delta should allow the four
airlines to stay on the route.
-By Lyndal McFarland and Iain McDonald, Dow Jones Newswires;
61-2-8272-4681; iain.mcdonald@dowjones.com
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