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Delta plans to form joint venture with Virgin Atlantic

Frequent travelers on Delta could be seeing benefits and perks from a new transatlantic partner in the months ahead, as the company announced a deal to buy a big equity stake and create a joint venture operation with Virgin Atlantic Airways.

Reports had started to emerge a few weeks ago that Delta was in discussions with Singapore Airlines to buy the latter’s 49 percent stake in Virgin, and now Delta has confirmed that it reached an agreement to do just that for an investment of $360 million.

Earlier stories suggested that if Delta was successful in acquiring the Singapore stake, then Delta’s SkyTeam partner Air France-KLM would persuade Virgin majority owner Sir Richard Branson to part with enough of his shares to give the SkyTeam duo control of the airline. E.U. law would bar a non-E.U. company like Delta from owning a majority stake.

But that’s not how it played out. Instead, “Virgin Group and Sir Richard Branson will retain the majority 51 percent stake and Virgin Atlantic Airways will retain its brand and operating certificate,” Delta and Virgin said in a joint statement.

The two carriers said they intend to file an application with the U.S. Transportation Department for antitrust immunity; if approved, it would enable them to coordinate flight schedules. The deal will also face review by the U.S. Justice Department and European antitrust regulators. “The share purchase and the joint venture are expected to be implemented by the end of 2013,” the airlines said.

If the joint venture clears the regulatory hurdles, it will give the two airlines a combined transatlantic network of 31 flights a day between the U.S. and U.K., 23 of them to London Heathrow—including nine flights a day between LHR and the New York area’s JFK and Newark airports.

The joint venture would also mean reciprocal frequent flyer benefits for the two airlines’ most frequent customers, as well as shared access to Delta Sky Clubs and Virgin Atlantic Clubhouse airport lounges for elite travelers. Virgin Atlantic already has a commercial partnership in the U.S. with Virgin America, in which Branson’s group holds a minority stake.

The two companies said they would share the costs and revenues from all joint venture flights. “This joint venture will deliver much more effective competition at Heathrow," said Virgin Atlantic chief executive Steve Ridgeway. “Both airlines are confident that the Department of Transportation will be as convinced as we are of the extensive consumer benefits arising from this joint venture, with expedited approval being granted by the end of 2013.”

Similar joint ventures have reportedly been taking a toll on Virgin Atlantic’s business in recent years. British Airways is a partner in a transatlantic joint venture with American Airlines, allowing the two carriers to coordinate schedules and pricing on routes between the U.S. and Europe.

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