What Delta’s 49% Stake in Virgin Atlantic Means for Frequent Flyers

Much rumored the past few weeks, now it’s official, Delta is acquiring a 49% stake in Virgin Atlantic. Here are my initial thoughts.

There were also rumors that Virgin would be joining an alliance soon. Since Singapore Airlines owned 49% of Virgin, Singapore is a member of Star Alliance, and Singapore has been tying itself up with Virgin Australia, most guesses were that Virgin would join Star Alliance.

That’s clearly no longer in the cards, and any alliance talk is likely to shift to Skyteam.

Many of the rumors the past week or so had Delta buying Singapore Airlines’ 49% stake in Virgin and Air France KLM buying a small portion of Richard Branson’s 51%, giving the two Skyteam airlines a controlling stake in Virgin Atlantic. That hasn’t happened yet, as now Branson’s interests still retain majority control of the airline.

The deal involves Delta and Virgin entering a joint venture across the Atlantic, and offering reciprocal frequent flyer benefits.

  • That’s a plus for the most part for Virgin Atlantic’s frequent flyer members, which currently have a weak scheme such that even access to Delta’s program is a positive (and eventual presumed access to other Skyteam partners is a benefit as well).

  • For Delta’s frequent flyers it’s a huge plus, since Virgin has an outstanding premium cabin business class product and very cool lounges especially at Heathrow but also in New York, San Francisco, and Hong Kong. Virgin’s award availability has been historically quite good, amazing by Delta standards, although it remains to be seen how the redemption of Delta miles for those seats and a Delta significant investment may change that in the future.

Delta and Virgin Atlantic are not merging. There’s no opportunity to combine Delta and Virgin miles towards the same award tickets, and in fact Delta doesn’t offer one-way award tickets for half the roundtrip cost so that can’t even be done on a do-it-yourself basis.

But Virgin’s miles become incrementally more valuable, and something that U.S. frequent flyers may want to pay more attention to. Both Virgin and Delta are American Express Membership Rewards transfer partners. Virgin’s fuel surcharges are extortionate. I accumulate most of my Virgin miles on one-day Avis rentals, even a one-day car rental nets me 1000 miles in their program and eventually it stacks up to be a worthwhile balance for redemption.

Delta is already in a tie-up with Virgin Australia, acquiring a big Virgin Atlantic stake brings them closer to the Virgin group.

With Singapore closer to Virgin Australia, an historical relationship (since-ended) between Singapore and Delta, and now a big financial transaction between them — and Singapore often thought of as being least tied into Star of any member airlines — one gets into wild speculation of about a future relationship between them. Although at the same time Singapore’s Virgin Australia relationship could be truly one-off and Singapore may just be finally done with their U.K. investment.

Bottom-line for most frequent flyers is that this is of marginal interest, but for Delta and Virgin frequent flyers this is of some benefit — although not as big a benefit for Virgin’s members compared to what it would have meant for them had Virgin joined Star Alliance myriad additional partners and better award availability generally that Star provides.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I’m quite certain that Virgin and Delta had a quite comprehensive co-operation sometime in the mid-late 1990s as well? Plus ça change, plus c’est la même chose.

  2. Singapore jumping from Star to SkyTeam would cause a monumental shift in perception of the two alliances, wouldn’t it? I don’t see it happening, but it’s certainly an entertaining thought.

    My gut, which has no particular airline industry knowledge, is that the Virgin airlines will eventually join SkyTeam. oneworld is not an option for them because of BA and Qantas. Virgin Atlantic clearly can’t go any direction but SkyTeam now. I also think SkyTeam has the most to gain by adding Virgin Australia because Star already has good networks in that region between Singapore and Air New Zealand. SkyTeam really doesn’t have anything, and absolutely needs a member like V Australia.

    Selfishly though, as long as my SkyPesos can still be redeemed on V Australia for a trip in 2014 or 2015, I’ll be happy. 🙂

  3. Gary,

    I don’t know that VS is a huge coup for DL flyers. I actually tried to redeem VS miles for VS flights (gasp!) and found the fuel surcharges and taxes to be worse than those on BA. If DL passes along VS fuel surcharges to its own members, then the value to me is meh at best. I like my travel as close to free as possible and VS/BA ain’t it.

  4. I’m nervous anytime the name Delta comes into play with a FF program especially their own program. I see them as the most evil corrupt folks in history to ever manage a FF program
    I go to any lengths to not fly anything Delta branded
    I refuse to support them
    Having a large account with Virgin Atlantic makes me extremely nervous if Delta has any say ever
    If Delta and their ugly business practices get involved I will immediately go to Star Alliance forever and never look back until their next bankrupcy

  5. Gary,

    You are terrible at speculating on anything involving business acumen. You run a blog on miles and points–you’re not an analyst at Goldman Sachs or a consultant at Accenture. Delta bought a stake that Singapore wanted to dump because it clearly underperformed. How on earth you see that as even nudging the possibility of a Delta Singapore tie up is beyond me.

  6. @Jorgen Habermas – I was making what I flagged as a wild off the wall musing. Not something to make financial bets on. But I’d gladly put my track record up against nearly all of the analysts at Goldman Sachs and Accenture. Who over there guessed over a year in advance which brand of toiletery Hyatt would be moving to??

  7. I do not think VS’s business class product is outstanding, the soft product [some might say the hard product too] has really gone down the toilet over the last few years. However, the Clubhouses are hands down one of the best business class lounge products. If I am flying on VS, the strategy is to eat a full meal in the clubhouse, and once in the air just get a snack, a nice drink, request for turndown service, and lights out.

    One thing I miss about having the VS partnership with CO is the ability to redeem miles to destinations in advance that otherwise would be a challenge like JNB, SYD, DXB, etc. We will have to see about those pesky fuel surcharges though.

  8. What does this mean for most frequent flyers? Fool’s gold and, more critically, higher fares for flights connecting London with NYC are going to be the result of ATI, when/if that comes about for DL and VS. Hopefully DOJ doesn’t allow them to collude on prices on that route at least

    The fool’s gold for frequent flyers: reciprocal elite status benefits to some extent or another.

  9. Gary,

    Pardon my ignorance, but can you recommend a post or site that actually explains what being part of a particular alliance practically means? I get the idea is that you can redeem miles in one currency to get flights in another airline, but I honestly am quite confused about how it tends to work. For example, I am planning to try to put together an anniversary trip to tokyo from NYC next august. I was going to go for United miles since they are the most flexible and cheapest to go to Japan. I know united partners with ANA in their alliance but I have no idea what that practically means for me. Do i just have two possible airlines to find availability on with my miles? Is it that ANA may have a better product than the just united planes? I have been lurking for a few months and have checked all the main posts, but I really couldn’t find anything explaining something this basic.

  10. Can you expand on how you’re able to earn so many Elevate points per rental on Avis? All I can see is a normal earn rate of 1 point per $, now at 3 points per $ with an ongoing promo.

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