Delta to see further revenue gains from Virgin Atlantic tie-up

New York
This story is sourced from Pro
See more Pro news »

Delta Air Lines anticipates additional revenue benefits from its joint venture with Virgin Atlantic Airways, three months into the carriers' tie-up across the North Atlantic.

Executives at the Atlanta-based carrier now expect the synergies to be greater than the $120 million in new revenue that they outlined when its investment in Virgin Atlantic was first announced in December 2012, writes Buckingham analyst Daniel McKenzie following comments at a Delta investor event on 26 March.

The Delta-Virgin Atlantic codeshare generated about $25 million in additional revenue for the former in the second half of 2013, Delta president Ed Bastian said in January. They began codesharing in July 2013.

The two carriers are still in the initial phase of “harvesting the benefits” of their metal neutral joint venture, which began on 1 January, writes McKenzie.

Virgin Atlantic is still on-track to report a profit in its 2014 fiscal year. Fleet renewal with Airbus A330s and Boeing 787s, network realignment and restructuring corporate costs are driving this, says chief executive Craig Kreeger according to McKenzie.

Virgin sees a $10 million revenue improvement from each Airbus A340 that it replaces with an A330, says Kreeger. This gain is expected to increase as the carrier begins taking delivery of 787-9s later in 2014.

The airline has added 10 A330-300s and removed two A340-300s and six A340-600s from its fleet since A330 deliveries began in February 2011, Flightglobal’s Ascend Online database shows.

Virgin Atlantic expects three 787s in 2014, eight in 2015 and five in 2016, according to McKenzie.