Delta Airlines Inc.
) has secured a tentative approval from the U.S. Department of
Transportation (DOT) for its planned tie up with Virgin Atlantic
for nonstop flights between the U.S. and the U.K. This takes
Delta a step closer towards antitrust immunity, the final hurdle
before the trans-Atlantic joint venture (JV) takes off.
Notably, in Dec 2012, Delta proposed to acquire a 49% stake in
British carrier Virgin Atlantic from Singapore Airlines. The
acquisition closed in Jun 2013 after the U.S. Department of
Justice and European Commission cleared the deal. However, DOT
clearance for the trans-Atlantic route is pending.
Now, the JV appears on track, with the DOT favoring the
amalgamation citing it will promote competition within the U.S.
and U.K. markets and in turn benefit customers. The DOT also
noted that the JV will create a strong contender to one of the
largest airline alliances, Oneworld, which includes heavyweights
like American Airlines, British Airways and Iberia.
The $360 million stake purchase will subsequently give Delta
more control over the New York to London network, which is being
dominated by American Airlines and British Airways. The
Delta-Virgin tie up is expected to hold the second spot in this
lucrative route with nine daily roundtrip flights across the
United Continental Holdings Inc.
) to the third position.
The DOT has given a 14-day period to raise objections to its
approval. If there are no objections to the JV, the regulatory
body will give its final go-ahead.
Per the joint venture agreement between Delta and Virgin
Atlantic, both carriers will share the expenses and revenues of
the flights. Delta holds a commanding position in the U.S. market
while Virgin Atlantic enjoys hefty slots at the popular Heathrow
We believe the Delta-Virgin Atlantic alliance will hugely
benefit customers with expanded and enhanced flight connectivity
to key markets, better pricing and suitable booking options.
Delta operates with the likes of
Southwest Airlines Co.
) and carries a Zacks Rank #3 (Hold). However, sector stock
U.S. Airways Group Inc.
) looks attractive with a Zacks Rank #1 (Strong Buy).
DELTA AIR LINES (DAL): Free Stock Analysis
US AIRWAYS GRP (LCC): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
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