Delta, WestJet expand alliance
U.S., Canadian airlines announce joint venture
Delta Air Lines and Canadian carrier WestJet announced plans Wednesday for a joint-venture partnership that would allow them to coordinate flights and fares between the USA and Canada.
If it materializes, Delta and WestJet could act together in setting prices and flight times on their U.S.-Canada flights. The airlines also pledged the deal would pave the way for new non-stop routes and “enhanced frequent flier benefits.”
The tie-up, which the airlines described as “a preliminary memorandum of understanding,” would deepen an existing partnership between the two.
The airlines already offer customers some reciprocal frequent-flier benefits and “codeshare” on some of each other’s flights. But a joint-venture partnership would go beyond that. It would let them coordinate flights to better compete against other rivals that fly between the USA and Canada. Typically, carriers in such partnerships share revenue — and sometimes costs — on flights that operate under the joint venture.
However, regulators must agree to give antitrust immunity that would be needed for the sides to legally be able to cooperate on fares and schedules. Approval from regulators — and the boards of each company — must still be secured before the joint-venture plan can advance.
On the regulatory front, airline jointventure requests for antitrust immunity have largely been OK’d by U.S. regulators in recent years. But not all have; the U.S. recently denied a planned joint venture between American and Australian carrier Qantas on concerns about competition in the U.S.-Australia/New Zealand market.
Delta, of course, has a deep history of joint-venture alliances. It long has been part of a joint-venture pact with Air France-KLM that allows those carriers to cooperate on flights across the Atlantic. More recently, Delta has entered a similar pact with Aeromexico and announced plans for one with longtime frequent-flier partner Korean Air.
But perhaps Delta’s most noteworthy joint-venture moves in recent years have come with Virgin Atlantic. Earlier this decade, Delta bought a 49% stake in the U.K. airline and quickly established a joint-venture pact with the airline. The move greatly expanded Delta’s presence at London’s lucrative Heathrow Airport, where Virgin Atlantic and Delta can now coordinate, sell tickets on and share revenue from each other’s flights.
That partnership grew even more formidable in July, when Delta, Virgin Atlantic and Air France-KLM announced plans for a unified joint-ven- ture setup that would create a blockbuster trans-Atlantic alliance of those airline brands.
Now, Delta’s joint-venture interests have expanded north, where Air Canada has been the top player on flights between Canada and the United States.
“With its strong brand and employee- and customer-centric culture, WestJet is the perfect partner for us in the U.S./Canada transborder segment and together we will produce great results for our respective employees, customers and investors,” Steve Sear, Delta’s chief for global sales, said in a statement.
The move also looks to strengthen WestJet’s position at a time when the low-cost carrier has started to look more like a traditional airline as it has expanded its reach, both within Canada and internationally. Its partnership with Delta would significantly enhance its access to the U.S. market, by far the top international market for Canadian airlines.
“This agreement will bring heightened competition and an enriched product offering to the transborder segment, both of which will benefit our guests,” Ed Sims, WestJet EVP, Commercial, said in a statement. “This is an important step in WestJet’s mission to become a global airline.”
The move also comes as Air Canada has become increasingly aggressive in expanding, both in the U.S. market and on overseas routes from Canada.
Part of Air Canada’s aim has been to court more international-bound U.S. fliers, tempting them to connect via its hubs in Toronto, Montreal and Vancouver for flights to Europe and Asia.
The proposed WestJet-Delta deal seems certain to up the competitive stakes with Air Canada as the latter also looks to increase its U.S. footprint. It also could renew pressure on Air Canada and United to consider deepening their own ties. The airlines have long been partners via the Star Alliance frequent-flier group, but do not have an “immunized” joint-venture that would allow them to closely coordinate schedules and fares in the way that Delta and WestJet have proposed.
“This is an important step in WestJet’s mission to become a global airline.” Ed Sims WestJet EVP, Commercial