Earlier I wrote about how Delta is buying a 10% equity stake in Air France-KLM, and Air-France KLM is buying a 31% equity stake in Virgin Atlantic. Delta already owns a 49% equity stake in Virgin Atlantic. On top of that, China Eastern is buying a 10% equity stake in Air-France-KLM, and Delta already owns a small stake in China Eastern. The common link here is that Delta is everyone’s daddy.
Reader Aamod asked if I think this means that Virgin Atlantic will finally join SkyTeam, given that they’ll now be 80% owned by SkyTeam airlines. It’s a good question, so let’s dig a bit deeper.
Rumors about Virgin Atlantic joining an alliance are nothing new
For years there have been rumors of Virgin Atlantic joining one of the major alliances.
Singapore Airlines used to own a 49% stake in Virgin Atlantic, and back in the day the rumor was that Virgin Atlantic would join the Star Alliance. This was around the time that British Airways bought British Midland, so it didn’t seem totally out of the question, given Star Alliance’s hole in London. Furthermore, Virgin Atlantic already partnered with several other Star Alliance partners.
At the time, Richard Branson was even quoted as saying that he thought Virgin Atlantic needed an alliance in order to survive. Many of us assumed this meant they’d finally join Star Alliance.
As it turned out, he was talking about a different kind of alliance, because just weeks later, Delta announced that they were taking over Singapore Airlines’ 49% stake in Virgin Atlantic. That new “alliance” came in the form of a transatlantic joint venture that has worked extremely well for both Delta and Virgin Atlantic.
Then it started to look like Virgin Atlantic might join SkyTeam, given Delta’s ownership and close cooperation with them.
Once this deal closes, Air France-KLM and Delta, both of which are in SkyTeam, will own 80% of Virgin Atlantic. Surely this will finally cause Virgin Atlantic to join SkyTeam, right? I don’t think so…
Why I think alliances are (mostly) dead
The Star Alliance was formed about 20 years ago, and at the time it was the hottest club in the industry. We quickly saw two other global alliances form, and before we knew it, dozens of the world’s leading global airlines joined these alliances.
But in the past few years we’ve seen virtually no new airlines join the three global alliances. This is despite the fact that we’ve seen tons of new partnerships. This trend isn’t a coincidence.
Look at Qantas’ partnership with Emirates, which has completely transformed their route network, even though they also belong to oneworld.
Look at Delta’s joint venture with both Virgin Atlantic and Virgin Australia.
In the case of SkyTeam, look how Delta and Korean Air were both part of SkyTeam, but up until now Delta isn’t isn’t awarding any elite qualifying miles for travel on Korean Air. I imagine this will change soon given their new joint venture, but at least up until now this has been the case.
At best, global alliances have plateaued and reached their full potential. At worst, they’re a dead concept.
Sure, there’s a chance that Virgin Atlantic does join SkyTeam, but I doubt it. The lack of activity when it comes to the big three global alliance is telling, at the same time that the number of small partnerships is growing at a fast pace.
I think the much bigger question is which big global airline will be the first to pull out of one of the major global alliances.
Do you think Virgin Atlantic will join SkyTeam? Do you agree that the three traditional alliances are dying?