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Delta Air Lines-Virgin Atlantic deal already impacting business travel

@denschaal

Jan 22, 2013 9:51 am

Skift Take

Delta is wooing new business travel accounts because of the Virgin Atlantic deal, and the most-loyal passengers will getting perks reserved for the few.

— Dennis Schaal

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Delta expects to attract more business travelers in its 747 BusinessElite seats, and lie-flat seats, as well, because of its Virgin Atlantic deal.


Delta Air Lines officials said today they expect a codeshare with Virgin Atlantic to be in place toward the end of June or early July, and that Delta’s pending stake in the British carrier is already benefiting Delta in wooing business travel accounts.

Delta’s move to take a 49% stake in Virgin Atlantic┬áis subject to a handful of regulatory approvals in the U.S. and Europe, and Delta expects the process to be complete by the end of 2013.

As part of the process, Delta expects to apply to the U.S. Department of Transportation for antitrust immunity by the end of January, said Richard Hirst, Delta’s general counsel during a conference call with analysts as Delta released its fourth quarter of 2012 earnings.

Delta president Ed Bastian, said the Virgin Atlantic deal is already helping the Delta win corporate accounts, particularly among financial services firms and banks that require better access to Heathrow.

Delta taking share

Over the last couple of years Delta has improved its business travel market share “substantially,” Bastian said, adding that better Heathrow access can now be knocked off companies’ wish lists, especially in the financial services sector.

Pointing to Delta’s strides in business travel, Bastian said the airline signed a corporate agreement in the last six months with one of the largest banks in the world, which is based in New York, a company that the airline never had a formal agreement with.

Delta’s push to install lie-flat seats on transatlantic flights and the Virgin Atlantic deal are providing momentum, officials said.

Bastian said Delta expects “strong traction” from the Virgin agreement, which will improve Delta’s position, especially in New York.

And, a Delta-Virgin Atlantic codeshare should be in place toward the end of the second quarter or beginning of the third quarter of 2013, even before the regulatory process concludes toward the end of the year, officials said.

Delta SkyMiles playing favorites

In other news, officials addressed the upcoming changes to Delta SkyMiles that will have frequent flyer statuses at the upper echelon determined in part on the revenue members bring to the airline, starting in 2014.

Officials said these changes mean Delta will be favoring “high-yielding” customers over low-yielding ones as the airline attempts to influence customer behavior.

Delta’s net income for the fourth quarter of 2012 was $7 million, a 98% decrease, while operating revenue rose 2% to $8.6 billion.

The airline’s profits were dragged down by $231 million in special items, including for those for fleet restructuring, fuel hedges, and Pacific route refinancing.

Sandy and the Trainer Refinery

Superstorm Sandy had a $75 million impact on the airline because of flight cancellations and a slow recovery, particularly in the Northeast, Bastian said.

And, now that Delta is in the refinery business, having bought the Trainer refinery outside Philadelphia last year, the storm took its toll there, as well.

Sandy slowed production and “lowered efficiency levels at the plant,” Delta stated, and contributed a $63 million net loss in the fourth quarter.

One unit at the refinery is still shut down because of Sandy, but should be operational again within a week, Bastian said.

“We have not shut down the refinery,” he added, in answer to a question.

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