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Marcus Middleton Headshot

Virgin/Delta Partnership Will Smash Airline Cartels

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International Airlines Group boss, Willie Walsh lost that bizarre bet of a 'kick in the groin' with Sir Richard Branson before he even made it... That's because the Virgin Atlantic/Delta partnership is the biggest kick in the nuts that British Airways ever has and ever will receive!

Last week, Mr. Walsh's comments made him look arrogant and stupid... Saying "Virgin Atlantic won't be around in five years" is as idiotic as saying "Manchester United will never win another Premier League title"!

If anything, Delta Airlines acquiring a 49% stake in Virgin will actually strengthen the Virgin brand and catapult it to a powerhouse in global aviation. It's a win/win. On one hand, you've got Virgin, the most comfortable, glamorous and stylish airline. While on the other, you have Delta, the largest and most disciplined airline in the world. How can that not be an exciting partnership? Pardon the pun- But on this one "the sky's the limit".

The jewel in aviation crown- The transatlantic route, is the most profitable route in the world; it makes up more than a quarter of all global business travel. Until now, British and American Airlines have held 60% of the market between the US and London. The lazy buggers haven't had to do anything for this Lion's share, and it has clearly showed... Well now, you can expect that all to change, all for the benefit of consumers.

Once it gets off the ground (Ha! There I go again!), the Virgin/Delta Partnership will finally see Virgin Atlantic as a real player and viable alternative for the business traveler. They will share costs and revenue on routes flying between Britain and North America. Hopefully this will see airfare prices fall thanks to the emergence of a real challenger. They'll be looking first to operate 31 daily round trips during peak season, 23 of those into Heathrow, a MUST for the business dollar and this number of flights is only expected to grow.

Whatever happens, the Virgin/Delta deal will stimulate competition in a heavily uncompetitive industry. I know it is ambitious, but I hope this deal will smash the 'Mafia Style' cartels that currently control the skies.

The One World and Star Alliances claim they are "built for convenience, ease, smooth transfers, and greater flexibility". Furthermore, don't forget the giant carrot they dangle in front of you which is they allow it so you can redeem frequent flyer points from one member airline with another member within the group.

The alliance system pitched like that sounds fantastic!

However, in reality, what it really achieves is that consumers pay more for travel while receiving poor service. Those alliance systems abolish all competition that's in the marketplace and encourage collusion. So instead of countless independents vying for your dollar, you only have two players running a giant duopoly of the skies.

Whenever I think of those two alliance systems mentioned, I picture in my mind all the member airline CEO's sitting around the dining room of Transylvanian castle on a stormy night, cackling deep throated and evil laughs. Can you blame me? Who really knows how they operate and how they make decisions? They're hidden, secretive, non-transparent, shady and a law unto themselves.

Moving away from the Atlantic, Look at 'The Kangaroo Route'- Sydney to London. You would think because there is so many airlines flying this route, there would be a rush for cheaper prices? Wrong.

While there are multiple airlines, they're all in the same two alliances and they are all working together- So no matter how much they try to appear independent, they're the same service underneath their tail livery.

Now I am an educated man, but for the life of me, I cannot work out how Qantas and British Airways get away with claiming to be in competition with each other on the 'Kangaroo Route'?

To prove my point, I went online and got the return airfare prices for both Qantas and British Airlines flights from Sydney to London return.

Return Ticket Airfares; Sydney-London

British Airways- £2,833

Qantas- £2,838

Not only are the prices similar, but on BA ticket, you fly out of Sydney on British Airlines plane and return from London flying Qantas. It is the same when you buy the Qantas ticket, however the roles are reversed, you fly to London on Qantas, but return home on BA.

How is that competition? How is that choice?

At first, the trusting, naïve traveller in me thought because the prices were so remarkably similar, that must just be how much it costs to operate the service and still maintain a respectable margin. Wrong again.

Because I went to the Virgin Atlantic website for a comparison and found for an identical ticket on the same dates. Now keep in mind, on Virgin Atlantic, you fly Virgin there, you fly Virgin back.

While expecting the ticket to be dearer than both British Airways and Qantas, I found they charged only £2,185. I could not believe it! No alliance, no cost sharing but £650 cheaper!

So my question is; if these alliances are meant to be good for travelers, reduce costs and be saving consumers' money, then how come the only independent airline, Virgin Atlantic's was able to provide a fare more than £650 cheaper? Having flown all three carriers, not only do you save money on Virgin, but you don't have flight attendants waking you up for autographs! On Virgin, you also get a better plane, better staff, and a better seat!

I know this one example isn't a "smoking gun" of cartel behaviour. I know there is no proof of collusion or price fixing... But c'mon? You've got to admit... It doesn't look good does it? At the VERY least it indicates that the major airlines operating under the One World Alliance aren't exactly going out of their way to offer travelers the most competitive prices are they?

You would think with all their combined and pooled resources, along with shared operating costs, BA/Qantas would have the cheapest fares for the consumer. The fact that Virgin Atlantic has shamed them with a dramatically lower airfare is a sad testament to just how flawed alliances can be.

To their credit, Virgin Atlantic have endevoured to stay independent for as many years as possible. But in this tough economic climate where every airline is losing money, they needed a stronger partner than Singapore Air to survive.

Their refusal to join one of the two major global alliances, Star Alliance or One World, is a position I have always commended. It has been proof and pride that the company has stood by the original purpose it was built for- to always be a 'Value for Money' alternative.

However, while their independence has been morally commendable, it has also been economically irresponsible and fraught with financial folly. I would have hated to be a shareholder. Virgin's refusal to join an alliance was one of the reasons the company operated at a loss of over £80 Million last year. A pretty big price to pay for doing the right thing.

Alliances in the modern aviation industry are "damned if you do, damned if you don't". As Sir Richard Branson said himself to Bloomberg TV in October. "to survive we need to have an alliance."

This partnership with Delta has done just that. It's a master stroke. It will give Virgin the resources it needs to expand and flourish, while allowing the brand to keep its identity and capitalize on what makes Virgin Atlantic the world's most innovative and exciting carrier. And most importantly... The deal keeps control of the company in British hands.

No wonder British Airways is running scared!

(I do not have any commercial agreements, interests or relationships with Virgin Atlantic Airways or Delta Airlines).