The second largest U.S. airline Delta Air Lines Inc. (DAL) entered into a codeshare agreement with China Eastern, a Chinese international airline.
Delta will expand its route network to more than 20 cities throughout China, consequently boosting its revenue in one of the world's fastest growing travel markets. China is expected to be the biggest contributor to global air traveler through 2014.
The agreement will expand Delta’s service offerings to 49 China Eastern operated flights between Shanghai and both Los Angeles and New York, as well as between Shanghai and more than 20 other Chinese cities.
China Eastern also stands to benefit from the deal. It will enjoy expanded service offerings on 38 Delta operated U.S. domestic flights as well as trans-Pacific services connecting Detroit and Atlanta to Shanghai.
In the Chinese routes, Delta currently offers services from Beijing to Seattle and Tokyo-Narita; Shanghai to Detroit and Tokyo-Narita; and Hong Kong to Detroit and Tokyo-Narita. Yesterday, the company started flying between Detroit and Beijing. In addition, Delta is expected to add more services between Shanghai and Atlanta this week.
Delta Air Lines is also strengthening its presence in New York through increased focus on corporate customers, expanded and improved airport facilities and increased services into and out of New York City. The company is introducing more services in Japan and Asia.
Last month, in a slot-swap agreement with US Airways (LCC), Delta obtained rights to 132 slots pairs (the authority to operate one takeoff and one landing) at New York's LaGuardia Airport from US Airways.
We believe the company’s global network, hub structure and alliances with other airlines will enable it to offer customers an improved global reach compared with its peers such as United Continental Holdings Inc. (UAL), AMR Corporation (AMR) and Southwest Airlines Co. (LUV).
We are currently maintaining our long-term Neutral rating with the Zacks #3 Rank (Hold) on Delta Air Lines.
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