Delta buys into Virgin Atlantic: what does it mean for Virgin Australia?

By John Walton, December 12 2012

With Delta set to take a 49% stake in Virgin Atlantic -- buying that stake from Singapore Airlines for US$360 million -- there are already questions being raised about its impact on Virgin Australia.

The quick answer: frequent flyers shouldn't fret. The Delta-Virgin tie-up is unlikely to deliver significant changes on the local scene.

Both Atlanta-based Delta and London Heathrow-based Virgin Atlantic are already partners for Virgin Australia's Velocity frequent flyers, so the consolidation won't mean a shakeup for your points balance.

Velocity members already get full earning and burning of frequent flyer points, though at slightly different rates for the two airlines depending on the fare you buy.

Virgin Atlantic and Delta flights earn the same amount of Velocity status credits.

Something to watch for is when the two airlines start codesharing -- that's when Delta puts its DL flight code on Virgin Atlantic's flights and vice versa.

The fine print on the Velocity website highlights that you can earn points only on flights that each airline actually operates, so codeshares don't count.

So unless that's ripe for changing, savvy frequent flyers will be keeping an eye on that little "flight operated by" section when they check flights, and reminding their travel bookers to pick non-codeshare services.

We'll keep an eye on developments and let you know if there's any further impact for Velocity frequent flyers.

Also read: Virgin Atlantic to join SkyTeam?

Of course, for the very latest news you'll want to be following us on Twitter! We're @AusBT.

John Walton

Aviation journalist and travel columnist John took his first long-haul flight when he was eight weeks old and hasn't looked back since. Well, except when facing rearwards in business class.

alex_upgrade77

alex_upgrade77

Qantas - Qantas Frequent Flyer

08 Sep 2012

Total posts 244

So it's inevitable. Virgin Australia and Virgin Atlantic (and probably America) will be joining Skyteam in the next 6 months max,

I wonder how that places VA in their tie up with SQ ex Australia? In any case, I don't think SQ see Skyteam or any of its members as a threat.

What do you all think? 

Newbie7

Newbie7

Qantas - Qantas Frequent Flyer

04 Dec 2012

Total posts 38

It would bring SkyTeam's standards up a notch, definitely. Currently I feel Korean's about the only one that is compatible to the SQs and CXs leading the other alliances. This said, DL is definitely the "Virgin" of the US carriers, a lot more innovative with better food quality than the conservative UA and AA. If Etihad falls into Skyteam somehow, that would really boost VA too, and can still keep SQ on the side since like you said, I doubt they see Skyteam as a threat in their region.

damien

damien

Virgin Blue - Velocity Rewards

12 May 2011

Total posts 20

I don't think this indicates anything at all. All of the Virgin airlines have been run pretty independantly and continue to do so. VA has shareholders across SkyTeam, Star Alliance and non-alliance airlines. 

I know previously that Borghetti mentioned that SkyTeam is a possible alliance partner, but to be honest VA has pretty much the world covered (except for a very major gap over South America) through its virtual alliance that I don't think they really need to become aligned with any of them. I think an alliance would have to draw them in with some sort of offer to do so.

TheRealBabushka

TheRealBabushka

21 Apr 2012

Total posts 3034

It makes sense now why Borghetti was so coy on the subject of an alliance. Where does this leave SQ?

If VA/DJ enters the Sky Team fold, SQ will be ditched on the Australian alter yet again.

Noob

Noob

Virgin Australia - Velocity Frequent Flyer

28 May 2011

Total posts 81

SQ is now an investor in Virgin Australia, so very unlikey. 

Futhermore, global alliances are becoming more flexible e.g. Qantas/Emirates or Cathay/Air New Zealand.

Remembering also, members are not set in stone, if they really wish to they could move alliances. 

The big question is, are global alliances slowly becoming redundant in their current form? Is the future 'made to measure' joint ventures and codeshares, tailored to the needs of specific markets? 

TheRealBabushka

TheRealBabushka

21 Apr 2012

Total posts 3034

That's a very good question, which I suppose leads to another question: What is the root cause of the failure of alliances doing what it was designed to do?

For example what prevented QF from hooking up with CX? I do not buy the argument that Australians are gagging to fly via DXB. They do so because EK is very price competitive and have a wider network.

Presumably airlines would not willy nilly enter into an alliance given the investment required. So why foresake it?

Perhaps the underlying basis of an alliance, the hub-spoke model (flying pax to LHR then onwards to feeder stations in europe), is no longer the way people wish to fly?

Maybe that is the root cause that needs to be sorted out. i.e. alliance members spreading themselves out across a larger network (rather than concentrating on hubs) facilitated through revenue and profit sharing.

watson374

watson374

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2221

Regarding the lack of QF/CX hook-up, I'm going to suggest that the problem is that QF's main role in it would be shuttling people from Australia to CX's hub in Hong Kong. This is problematic because CX can fly people from Australia to Hong Kong by itself, without QF.

So from the CX point of view, there's no point in getting a QF direct partnership because it can do the entire operation (and thus get all the money) by itself.

Currently, the only Asian carrier I can think of that QF could leverage is MH, and then only because it means MH can divert resources to other regions. MH has a relatively well-positioned hub, but it isn't as strong as SQ or CX, who can afford to clobber QF.

It's the end-of-the-line problem. The are massive disadvantages to being based in Australia rather than Singapore.

TheRealBabushka

TheRealBabushka

21 Apr 2012

Total posts 3034

I hear you but then you're still thinking along the lines of hub-spoke.

I'm talking about turning alliance on its head and re-think the way we look at it. To take the example of QF/CX, it could be that QF/CX carve the australian market between the two, say CX focusing on MEL; QF on SYD and doing revenue/profit sharing. Kind of like what QF and SA are doing on the SYD/JHB, PER/JHB sectors.

Now this is going to get competition authorities jumping up and down. Not to mention fifth freedom rights issues BUT if you have whole alliances pressing on perhaps we can confront and better compete with the state funded behemoths out there! 

watson374

watson374

Qantas - Qantas Frequent Flyer

17 Aug 2012

Total posts 2221

I was replying to the comment regarding CX alone, but this has got me thinking.

I suppose this can't happen until QF has its hands on new planes so that it can afford to release A332s and B789s for this kind of network orientation (based on the idea that the A388 and the B744 are only good for hub-and-spoke).

I still don't really see much benefit for CX, but I can see a lot of benefit for MH.

TheRealBabushka

TheRealBabushka

21 Apr 2012

Total posts 3034

Hey get this. SQ bought its stake in VS for $968 million and are now selling it for $360 million!

There were always rumours that SQ was not happy with the performance of this investment. Insiders have indicated they've been wanting to divest for some time now. But I didn't realise they wanted to get rid of it that badly!


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