The
Delta Airlines Inc.
(
DAL
) stock got positive reactions from the market to the U.S.
Department of Transportation’s (DOT) approval of its tie up with
Virgin Atlantic for better flight offerings between the U.S. and
U.K. The approval, which was seen as the final hurdle to the
trans-Atlantic joint venture (JV), came within a month of the
tentative nod from DOT.
Looking back, in Dec 2012, Delta proposed to acquire a 49%
stake in British carrier Virgin Atlantic from Singapore Airlines.
The acquisition closed in Jun 2013 after the U.S. Department of
Justice and European Commission cleared the deal.
Now, with the DOT nod, the JV will promote competition within
the U.S. and U.K. markets and in turn benefit customers. The
transport service regulator also noted that the JV will offer
customers with more travel options between the cross Atlantic
nations, in particular the New York and London market.
Currently, New York-London is the most lucrative business
market in the world for passenger carriers that target business
customers within the route. The route is currently being
dominated by British Airways and American Airlines.
Delta and Virgin Atlantic will also work together to optimise
their network opportunities and operate 32 daily flights between
North America and U.K. The trans-Atlantic amalgamation will
subsequently give Delta more control over the New York-London
route and the second spot in this market with nine daily
roundtrip flights.
Per the terms of the JV agreement between Delta and Virgin
Atlantic, both carriers will share the expenses and revenues of
the flights. Delta holds a commanding position in the U.S. market
while Virgin Atlantic enjoys hefty slots at the popular Heathrow
Airport.
The deal provides Virgin an opportunity to slash losses, while
for Delta it’s an opening to strengthen its operations on some of
the busiest routes on either side of the Atlantic. However,
we believe the Delta-Virgin Atlantic alliance will benefit
customers the most, who will gain from expanded and enhanced
flight connectivity to key markets, better pricing, seating
facilities and suitable booking options.
Delta operates with the likes of
United Continental Holdings Inc.
(
UAL
) and carries a Zacks Rank #3 (Hold). However, sector stocks
Republic Airways Holdings Inc.
(
RJET
) and
Hawaiian Holdings Inc.
(
HA
) look attractive with a Zacks Rank #2
(Buy).
DELTA AIR LINES (DAL): Free Stock Analysis
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HAWAIIAN HLDGS (HA): Free Stock Analysis
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REPUBLIC AIRWAY (RJET): Free Stock Analysis
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UNITED CONT HLD (UAL): Free Stock Analysis
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