The trans-Pacific alliance between the second largest U.S. airline Delta Air Lines Inc. (DAL) and Virgin Australia Airlines received approval from the Department of Transportation (DOT).
The trans-Pacific joint venture is expected to be completed by the end of this year with new services between the United States, Australia and South Pacific.
Both Delta and Virgin Australia started codesharing flights in January 2010. In May 2011, the deal was expanded to include five new destinations in Australia and New Zealand to Delta's network and was awaiting the final clearance from DOT.
In early June, Delta expanded its network in China to more than 20 cities, which should in turn boost its revenue from one of the world's fastest growing travel markets. China is expected to be the biggest contributor to global air travel through 2014.
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 in and out of the city. The company is also 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.
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).
However, Delta Air Lines faces significant competition with respect to routes, services and fares. Competition is also severe at hub airports in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York-JFK, Salt Lake City, Paris-Charles de Gaulle, Amsterdam and Tokyo-Narita or at hubs of other airlines that compete on a connecting basis.
We are currently maintaining our long-term Neutral rating on Delta Air Lines. The company also retains a Zacks #3 Rank (Hold) for the short term.
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