Virgin Atlantic Linkage With Delta, Air France-KLM Adds Cargo Capacity, Convenience

The new trilateral strategic partnership among Virgin Atlantic, Delta Airlines (NYSE: DAL) and Air France-KLM is expected to benefit cargo customers by making it easier to do business, providing more delivery choices and improving operational efficiencies.

Benzinga · 02/04/2020 14:14

The new trilateral strategic partnership among Virgin Atlantic, Delta Airlines (NYSE: DAL) and Air France-KLM is expected to benefit cargo customers by making it easier to do business, providing more delivery choices and improving operational efficiencies.

The trans-Atlantic joint venture became effective Monday, more than two months after the U.S. Department of Transportation approved the arrangement. It replaces arrangements Delta had with Virgin Atlantic on U.S.-U.K. routes and among Delta and Air France-KLM on U.S.-Europe services, creating a powerful counterweight to the close alliance among British Airways, Iberia and American Airlines (NASDAQ: AAL).

The granting of antitrust immunity by regulators opened the door for greater collaboration among the airlines.

The partnership offers shippers and logistics providers a broader network with route flexibility and connectivity, and more options to reroute a shipment if service is interrupted for unforeseen circumstances on a particular flight. Enhanced service potential comes from the ability to co-locate freight facilities, integrate booking platforms and offer joint trucking options.

"Virgin Atlantic has fantastic service and a great product, and they'll add new capacity to the existing joint venture, especially to Heathrow Airport," Neel Jones Shah, executive vice president and global head of airfreight at logistics provider Flexport, said in an email about the new linkage. "I don't foresee any price increases for the freight forwarding community since the trans-Atlantic is in a chronic overcapacity situation which only gets worse during the summer season."

"The combined network means more choices and value for our customers as we align our services to enable seamless transfers and further streamlining of transport times," Adriaan den Heijer, executive vice president of Air France-KLM Cargo, said in a news release.

The new partnership has more than 600,000 tons of annual capacity available for shippers, representing 23% of total trans-Atlantic cargo capacity, according to the joint venture partners.

Shippers can take advantage of up to 341 peak daily flights, including 110 nonstop routes with onward connections to 238 cities in North America, 98 in Europe and 16 in the U.K. The enhanced network is built around hubs in Amsterdam, Atlanta, Boston, Detroit, London Heathrow, Los Angeles, Minneapolis, New York-JFK, Paris, Seattle and Salt Lake City.

More than 90% of sectors flown between North America and Europe will be widebody aircraft, which provide more space below deck for freight and mail.

The airlines already co-locate at warehouses in key airports and said they will review opportunities to co-locate further at more airports worldwide. In October, Virgin Atlantic Cargo and Delta Cargo opened a larger, joint export facility at London Heathrow International Airport.

The four airlines will also be able to tailor products and services to specific customer needs, including certified quality compliance programs for safe handling of pharmaceuticals.

Jones Shah, a former cargo chief at Delta, cautioned that the expanded joint venture doesn't address the complexity of booking on tradelanes that aren't covered by the antitrust immunity. Shippers will "be forced to work directly with multiple carriers' sales teams when choosing routes that don't have immunity. Ultimately this means more touchpoints for freight forwarders and added commercial complexity."

As part of the deal, announced in July 2017, Delta took a 10% stake in Air France-KLM. Virgin majority owner Richard Branson late last year backed out of a tentative deal to sell 31% of his interest to Air France-KLM.

Delta owns 49% of Virgin Atlantic.

JetBlue, which plans to launch its first trans-Atlantic routes next year, complained to the DOT that an extended joint venture with Virgin Atlantic should not be granted antitrust immunity because it would restrict competition and access to landing slots at European airports.

Delta's new joint venture with LATAM Airlines is also expected to give shippers more service options.

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