THE BLOG
12/13/2012 06:34 pm ET | Updated Feb 12, 2013

Delta Bought a Stake in Virgin Atlantic for the 'Cool' Factor

Beyond $120 million in annual synergies, an expanded presence at Heathrow and a bulked-up network, a relatively stodgy Delta Air Lines views its new 49 percent stake in Virgin Atlantic as an investment in British and Richard-Branson-cool.

In an investor presentation release, Delta cited Virgin Atlantic as the eighth coolest brand in CoolBrands Top 10 UK Brands for 2012-2013, and noted: "Virgin brings a premier global brand that will enhance Delta's brand equity through association and passenger access."

After all, today you can't imagine the crew from the Atlanta-based airline, the second-largest in the world, ever acting like this.

In additon to such intangibles, Delta also provided more information about the nuts and bolts of its latest transatlantic partnership, which it characterizes as a "$3 billion revenue joint venture for flying between North America and the UK."

Among the highlights:
  • Delta gets three seats on the Virgin Atlantic board;
  • The two airlines' combined network offers 23 daily roundtrips from Heathrow, 31 daily roundtrips between the UK and North America, and nine daily flights between Heathrow and New York airports.
  • Delta will apply to add Virgin into its current antitrust immunity with partners for transatlantic flights; and
  • Delta expects to implement the joint venture with Virgin Atlantic by the end of 2013, if all of the regulatory paperwork is in order.

Delta said its joint venture with Virgin Atlantic will "significantly increase [its] Heathrow presence."

Delta's current U.S./Heathrow seat share stands at 8 percent while Virgin Atlantic accounts for 16 percent, compared with 43 percent for king-of-the-hill British Airways.

International equity investments, such as Delta's $360 million buy into Virgin Atlantic, are a key part of Delta's strategy, so it wouldn't be surprising to see Delta woo other airline partners in 2013.

However, such investments may not be on a scale of the Delta-Virgin Atlantic investment.

Along these lines, Delta already has a 4 percent stake in Aeroméxico and one seat on the board, and a 3 percent stake in GOL that comes with a board seat, as well.

By Dennis Schaal