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Delta, Virgin Atlantic to Begin Passenger Sharing

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Delta Air Lines has closed on its deal to buy a 49 percent stake in Richard Branson's Virgin Atlantic Airways, the carriers said Monday morning.

"We are very excited to announce today that share transaction has been completed and we stand firmly together as partners," Delta President Ed Bastian said on a conference call with reporters. "This is a strategic investment that will enhance Delta's network and create a trans-Atlantic joint venture between the U.S. and the U.K., which is going to be a $3 billion entity."

The move stops short of a full merger of the two carriers, though it gives Delta a significant ownership stake and a seat on the board of the United Kingdom's No. 2 carrier. Branson's Virgin Group will retain its controlling 51 percent stake, just as it had Singapore Airlines owned the 49 percent stake just purchased by Delta.

Still, Virgin Atlantic CEO Craig Kreeger described the pact with Delta as "truly a fundamental turning point in the history of Virgin Atlantic."

"Because of the nature of our route network and customer base being so concentrated in the United States and the U.K., the Delta deal for us is the most-important thing we can do," Kreeger added.

For passengers, the tie-up is expected to bring pooled flight options and reciprocal frequent-flier benefits for customers of each carrier. The most tangible sign of that begins next month, when the airlines begin selling seats on some of each other's flights. They'll also open lounge access to eligible members of either carrier.

Delta and Virgin Atlantic will begin code-sharing—or placing their codes and selling seats on each other's planes—on flights from July 3. That also allows the airlines to sell single tickets for connecting itineraries that involve both carriers. For example, a passenger could fly from Atlanta to London on Delta and then connect to a Virgin Atlantic flight to Glasgow.

The code-sharing will begin with Delta placing its code on 17 Virgin Atlantic routes, including Virgin Atlantic's "Little Red" domestic routes between London and Manchester, Edinburgh and Aberdeen. Virgin Atlantic's code initially will go on 91 Delta routes, including both trans-Atlantic and domestic U.S. routes.

Delta and Virgin Atlantic customers also will be able to earn miles—including those that count toward elite status—on any flight offered by either carrier as of July 3.

"That's not just code-share flights," Bastian said, describing it as "a huge advantage for customers, in particular a meaningful offering for our corporate and frequent travelers."

"This is beneficial to our frequent-fliers across the globe," Kreeger said, adding that they will receive "key touches ... such as priority check-in and extra baggage."

The airlines hope the move, first announced in December, will give them a competitive boost both at London's capacity-controlled Heathrow Airport and on the highly lucrative routes between the United States and Europe.

"Heathrow is a hugely important travel market where Delta has long wanted greater access," Bastian said. "Eight of the top 10 trans-Atlantic markets [are] to Heathrow, and it's the No.1 destination for corporate travelers between the U.S. and the U.K.

"But our options at Heathrow were limited, so when the opportunity to form a partnership with Virgin Atlantic came along, we moved quickly," he said. "For Delta, this deal is a game-changer. It transforms our ability to compete on trans-Atlantic routes."

Bastian also made a passing reference to the joint venture already in place between British Airways and American, which combine for a commanding share of the market between London and the United States.

"Together, we'll be able to compete more efficiently between North America and the U.K., particularly given the dominance of British Airways and American at Heathrow," Bastian said of about Delta and Virgin Atlantic's venture.

For Virgin Atlantic, Delta's access to the U.S. market is a key component of the deal.

"The U.S. market has always been important to Virgin Atlantic," said Kreeger. It currently flies from London to 10 U.S. airports, and "opening up our flights to Delta customers allows us to diversify our sources of income and to grow our trans-Atlantic business further."

The airlines' proposed joint venture—which cements a deeper partnership than the current code-share arrangement—still must be OK'd by the Department of Transportation. The carriers said they expect that approval to come later this year. That would allow the joint venture to launch in "the first quarter of 2014," Bastian said.

"In the meantime, we look forward to welcoming Virgin Atlantic passengers onboard our flights and to offering Delta customers a bigger and better network between North America and the U.K.," Bastian said.


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