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Dec. 11, 2012 at 5:17 PM ET
As financial analysts and federal regulators digest the news that Delta Air Lines is buying a 49-percent stake in Virgin Atlantic Airways, travelers wondering what it means for transatlantic flights would be advised to take their cues from a line made popular during the Watergate era.
Follow the money.
“The monies are just astonishing,” said Joe Brancatelli, publisher of the business travel website JoeSentMe.com. “The New York–London route is bigger than the next three (U.S.–Europe) routes combined.”
The $360 million deal won’t lead to significant changes for fliers, at least in the short term. Instead, it’s another installment payment on Delta’s efforts to capitalize on a route that’s among the most prestigious and profitable in the world.
According to Delta CEO Richard Anderson, the hookup will give the joint venture 24 to 25 percent of the U.S.-U.K. market. That will put them firmly in second place behind American Airlines and British Airways, which launched a similar venture in 2010 and currently control 60 percent of the market.
“They’re trying to become more relevant to New York fliers,” said consultant Brian Clark, a partner at Hudson Crossing. “They’ve spent an enormous amount of money on their New York operations.”
Exhibit 1: Terminal 4 at JFK, where Delta is currently spending $1.2 billion to expand operations with new gates and a 24,000-square-foot club lounge. It’s set to open in spring 2013.
For fliers based in cities other than New York, the new venture may provide more convenient access to London through codeshare operations. Given that “slots” at Heathrow are tightly controlled, increased frequency isn’t an option; instead, fliers in Chicago or Miami or Seattle may find connecting through New York a viable alternative, especially if they’re members of Delta’s SkyMiles mileage plan.
Consider Seattle-London. “Now you can feasibly say, hmmm, Seattle-London on BA or Seattle-New York-London on Delta/Virgin and you get your miles,” said Brancatelli. “That’s the kind of calculation business travelers are always making.”
And for most travelers, accumulating those frequent flier miles/points will likely prove to be the icing on the cake of the Delta/Virgin deal, provided Virgin joins the SkyTeam alliance formed by Delta, Air France, KLM and other carriers.
“Consumers will benefit when they can earn and burn points and miles on partner carriers,” said Clark. “It was conspicuous that there was no talk of SkyTeam integration during the announcement.”
“We will look at alliance membership if it’s the right thing to do for the business,” said Julie Southern, Virgin Atlantic’s chief commercial officer. “We’ll reach a conclusion on that over the next few months.”
In the meantime, fliers shouldn’t expect much in the way of changes to their trans-Atlantic flying experiences. The deal still has to pass muster with government regulators in the U.S. and EU, although that’s expected since the much-larger American/British Airways venture has already been granted antitrust immunity.
Assuming that happens, the biggest near-term change will be that travelers will be able to book flights on either Delta’s or Virgin Atlantic’s website, although the two carriers will continue to operate their own flights. In a nutshell, the combination will give U.S. customers more access to existing services but it won’t increase capacity.
Presumably, those “existing services” will include access to both airlines’ club lounges, at least for elite members of their loyalty programs, a perk that Brancatelli suggests shouldn’t be dismissed.
“What Virgin Atlantic has that no one else beats are their clubs,” he told NBC News. “They have terrific food; they know you by name; they treat you like you were just there yesterday. Their arrivals lounge in T3 at Heathrow is just a terrific place to be.”
Rob Lovitt is a longtime travel writer who still believes the journey is as important as the destination. Follow him at Twitter.