Delta Air Lines DAL has inked a strategic cooperation memorandum of understanding with Saudi Arabia's startup airline, Riyadh Air, in a bid to introduce a wide range of benefits for customers traveling between North America, the Kingdom of Saudi Arabia and destinations beyond. Riyadh Air is scheduled to commence operations in 2025
Per the agreement, Delta will operate as Riyadh Air's exclusive partner in North America. This will offer its customers access to multiple destinations in the United States. Conversely, customers of the Atlanta-based Delta will have access to multiple Saudi Arabian destinations, following the deal. In the future, DAL intends to operate nonstop flights between the United States and Riyadh’s King Khalid International Airport. At present, not a single U.S. airline flies to the oil-rich kingdom.
Naturally, Delta’s decision to associate with a carrier that has not started operations yet is aimed at tapping Saudi Arabia’s potential as a favorite tourist spot. Saudi Arabia is focusing immensely on promoting travel to the kingdom as part of its long-term economic growth plan.
Both carriers want to translate the association into a long-term relationship, subject to regulatory approvals. The long-term association will include interline and codeshare connectivity. A codeshare pact allows the sharing of flights, which implies that a passenger can avail any flight operated by either of the companies under this agreement, irrespective of the flight number. As and when the codeshare collaboration materializes, the travel experience of passengers should get a boost as they will have access to convenient connections and more flexible booking and ticketing options between North America and Saudi Arabia.
Delta’s association with a Gulf carrier marks a shift in its approach. We would like to remind investors that almost a decade ago, Delta, along with United Airlines UAL and American Airlines AAL accused Gulf carriers of using government subsidies to promote unfair competition.
However, relations between Gulf carriers and its U.S. counterparts have improved since then, as can be seen by American Airlines’ partnership with Qatar Airways and United Airlines’ association with Dubai's Emirates. Delta’s deal with Riyadh Air is another step in that direction.
Price Performance
The DAL stock has appreciated 16.5% on a year-to-date basis, handily topping its industry’s 11.5% growth.
Image Source: Zacks Investment Research
Zacks Rank
All three above-mentioned carriers currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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