Bloomberg is reporting that Virgin Atlantic is in “fairly advanced talks” to join one of the three major alliances:
“Virgin Atlantic has always enjoyed its independence, but since pretty well every competitor that we have has an alliance I think we have finally decided that to survive we need to have an alliance,” Branson said in an interview with Bloomberg Television in Mumbai today. He declined to name the group the London-based airline is speaking with.
By far the most logical choice for Virgin Atlantic would be Star Alliance, in my opinion. As it stands, Virgin Atlantic is 49% owned by Singapore Airlines, and partners with a handful of Star Alliance airlines. British Midland (a Star Alliance member at the time) was recently taken over by British Airways, so Star Alliance now doesn’t have an airline based in London. OneWorld is completely out of the picture given that British Airways belongs to it, which leaves SkyTeam. While I’m sure SkyTeam would like to have Virgin Atlantic, I’m not sure how much value they could add for Virgin Atlantic.
While Star Alliance is the obvious choice, I suspect the one potential roadblock would be United. They have “veto” rights on airlines joining the Star Alliance, and they compete head-on with Virgin Atlantic out of Chicago, Los Angeles, Newark, San Francisco, and Washington Dulles. It’s interesting to note that Virgin Atlantic used to partner with Continental, and shortly before the merger with United that partnership ended. That led me to believe that United was behind that decision, given that they didn’t want to partner with an airline that competed with them directly on several routes.
The thing that makes Virgin Atlantic unique is that they fly almost exclusively longhaul, meaning they don’t add much value for connections. For example, Lufthansa adds a huge amount of value to United by connecting United passengers to dozens of destinations in Europe, and United adds a huge amount of value to Lufthansa by connecting Lufthansa passengers to dozens of destinations in the US. Virgin Atlantic can’t add the same value since they have fewer destinations.
So it’ll be interesting to see how this plays out. I suspect Virgin Atlantic would like to join the Star Alliance and probably won’t have an issue joining simply because they already have several partners in the alliance, and they could put pressure on United to let them join. That being said, if United wants to play hardball, they could deny them entry, and that might push Virgin Atlantic to SkyTeam.
Just my two cents… what do you guys think?
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