Delta Air Lines ( DAL ) has successfully
crossed two of the three regulatory hurdles in the path of its
planned stake purchase of Virgin Atlantic Airways Ltd. The U.S.
Department of Justice as well as the European Commission gave their
green signal for the proposed acquisition. However, the deal will
be completed following the antitrust approval from the U.S.
Department of Transportation, which is expected in the latter part
of the year.AMR CORP (AAMRQ): Get Free ReportBOEING CO (BA): Free Stock Analysis ReportDELTA AIR LINES (DAL): Free Stock Analysis
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In December last year, Delta confirmed its plans to buy a 49%
stake in British carrier Virgin Atlantic that is currently with
Singapore Airlines. The remaining 51% stake will be retained by the
Virgin Group. Delta Air Lines will shell out £224 million or $360
million for the purchase and substantially gain more control over
the New York to London network - one of the busiest air itineraries
across the globe.
Interestingly, the air travel network between the U.S. and United
Kingdom, including the one between the two foresaid cities, is
dominated by a joint venture of AMR Corp. 's ( AAMRQ ) American
Airlines and British Airways with the majority of the slots at
London Heathrow Airport under their control.
The regulatory boards on both sides of the Atlantic completed
their respective investigations, before permitting the deal to
proceed. Both the department stated that the deal will not pose an
antitrust threat, with Delta and Virgin Atlantic still continuing
to stand as strong competitors to the American Airlines-British
Airways partnership as well as other airlines.
Following the partnership, Delta Air Lines and Virgin Atlantic
will gain 36% access to the New York-London travel route, second to
the 51% control exercised by British Airways and AMR Corp.
United Continental Holdings ( UAL ) will have the
third position with 13% of the market share.
Per the joint venture agreement between Delta and Virgin Atlantic,
both carriers will share the expenses and revenues of the flights.
The two companies aim to operate 31 total daily flights both ways
between the United Kingdom and North America during the peak
season, with 23 flights to and from the Heathrow airport.
We believe that with this transaction, Delta and Virgin Atlantic
target to offer additional frequent quality travel options for the
trans-Atlantic flyers. The amalgamation of Virgin Atlantic's hefty
slots at the Heathrow airport and Delta's commanding position over
the U.S. airline network are expected to work in favor of
passengers with extensive travel plans. This will hugely benefit
customers with expanded and enhanced flight connectivity to key
markets, better pricing and suitable booking options.
Delta - which will start seasonal non-stop flights every Saturday
from December to various destinations utilizing The Boeing
Company' s ( BA ) aircraft -
currently retains a Zacks Rank #3 (Hold) rating.