Delta Air Lines is grabbing a bigger share of the world's most important travel route: New York to London.
The airline is paying $360 million for almost half of Virgin Atlantic, the swanky airline founded by Sir Richard Branson in 1984 as a cheaper and more stylish way to fly between the U.S. and London.
Business travelers are hungry for flights on that route and Delta has been missing out. With this deal, Delta is buying its way into that market.
The carrier's 49-percent stake in Virgin Atlantic was held by Singapore Airlines, which paid $960 million for it in 2000.
For travelers, the deal means more seamless connections on flights from inside the U.S. to the U.K. Frequent fliers will soon be able earn and redeem miles on either carrier. Finally, some Delta travelers will get access to Virgin Atlantic's well-regarded airport lounges.
Delta has just three flights a day from New York to London's Heathrow Airport. That's not enough for an airline that is aiming to dominate New York travel. Together with Virgin Atlantic, it would have nine flights a day.
American Airlines and British Airways have a combined 14 flights a day from New York to Heathrow.
"Delta will now be credible from NYC to London," wrote J.P. Morgan airline analyst Jamie Baker.
He said Delta has about 10 percent of New York-to-London business now. The deal would give Delta and Virgin a combined 38 percent share, he wrote. That compares with 49 percent for the American-British Airways venture and 11 percent for United Airlines and its partners.
Regulators in the U.K. and U.S. still need to approve the Delta-Virgin venture, but in 2010 they approved the larger venture between American and British Airways.
Delta is aiming to have the joint operation running by the end of 2013.
Delta can't simply add flights to Heathrow because capacity there is limited. And the Virgin deal, by itself, won't put more planes at Heathrow. But Delta CEO Richard Anderson said he expects to maximize Delta and Virgin's landing rights in ways that help both of them.
Virgin Atlantic will benefit because Delta will funnel passengers from around the U.S. onto Virgin Atlantic planes headed to London.
"I look forward to working with Richard Anderson and his team and continuing to give the rest of the industry a true run for its money," Branson said by a video link shown at the Delta-Virgin press conference in New York. Continued...