Virgin Blue and Delta plot transpacific alliance

Delta Air Lines and Virgin Blu are planning a joint venture in a bid to expand the reach of both carriers between the US, Australia and the South Pacific.

The airlines announced they are seeking regulatory approval for the alliance, and antitrust immunity in the meantime to implement code sharing, frequent-flyer programme reciprocity and lounge exchange rights.“Together, Delta and the Virgin Blue Airlines Group will be a stronger and more effective competitor by offering consumers greater choice of destinations, frequencies and schedules, all on leading-edge aircraft,” said Glen Hauenstein, Delta’s executive vice president for network and revenue management.

Delta is the world’s largest airline by passenger numbers, carrying 121.5m people in 2008, whilst Virgin Blu is Australia’s second-largest carrier after Qantas and 26 percent owned by Richard Branson.

Brett Godfrey - chief executive and co-founder of Virgin Blue - said the tie-up with Delta would help his airline, which has been forced to cut capacity, axe staff, and delay the delivery of new aircraft as profits have slumped over the past year.

“Not only will we offer travellers many new benefits and possibilities, but also the alliance of two new entrant operators will ensure that vital competition is sustained on the trans-Pacific route,” he said.

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Oversupply on the transpacific route has resulted in a price war between the four operators: United Airlines, Qantas, Delta and Virgin Blue.

The new alliance would effectively reduce the number of carriers on the route to three, leading to less aggressive pricing and better yields for the airlines.

The last few months has seen a 30 per cent increase in capacity on the Pacific route while demand has fallen 10 per cent.
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