Delta v. IAG the global airline fight of the decade?

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Delta Airlines has never gone down the road of IAG and created a holding group to manage its airlines.

In many ways this has shielded its public visibility as to what it actually owns.

It’s created a vast web of shareholding’s that continuously re-shape the alignment of the airline industry. And when they do somebody somewhere pays the price. Of late that’s been IAG.

Delta recently snatched LATAM right out from under American Airlines and has already started to move it out of OneWorld and eventually into Skyteam. All of that has a direct effect on IAG who own Iberia, the Spanish Flag Carrier.

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Iberia has close links with LATAM into its traditional Spanish speaking market – Madrid was and is the centre of Spanish speaking culture and has remarkably tight ties to the region.

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This also affected British Airways, who fly to several South American destinations and needed LATAM to make its connections viable.

American Airlines has a huge South American network which will be impacted through a loss of connectivity.

And it’s not just there that the IAG/Delta clash has made itself felt.

Delta effectively owns BA’s hated competitor Virgin Atlantic. With a 49% holding of its own, and a cross-holding through AF-KLM, its in effective control of 79% of the airline.

It has effectively taken on BA in its own backyard by allowing Virgin Atlantic to buy FlyBe and provide it with a domestic airline that if anything, has the potential to be superior to BA.

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BA flies only into Heathrow as a hub, Gatwick as a secondary base, but Virgin Connect as it will become in 2020, has connections to Virgin Atlantic’s Gatwick, Manchester and Heathrow operations as well as regional flights into Europe – like Amsterdam, which is Delta’s European Hub. Cross those links with KLM’s U.K. operations and you have Amsterdam heavily connected to the U.K. regions.

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And of course Delta owns a percentage of KLM and Air France.

The reason IAG wanted to buy AirEuropa so quickly, was its network into South America and that it allowed IAG to grab almost complete control of the Madrid Barajas base for Iberia.

AerEuropa, significantly, won’t be an IAG top line subsidiary, but a subsidiary of Iberia. Much along the same lines as Edelweiss is a subsidiary of Swiss, owned itself by Lufthansa Group.

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Delta with Skyteam and IAG with OneWorld are up against each other across the Atlantic on crucial routes. The United/Lufthansa combine is nothing compared to the Delta-AF-KLM-VirginAtlantic grouping from three major hubs – London, Paris and Amsterdam.

IAG has 57% of the Heathrow market and potentially 80% of Madrid Barajas, never mind control of international links out of Dublin and Shannon to the US through AerLingus.

The problem for consumers is they are mostly unaware of the alliances and ownerships, not seeing the near monopolies that offer them plenty of choice but very little in price advantage, and not always sensible connections.

For the airlines its a legalised duopoly, they can’t really loose out, even if the battle lines are closely drawn. In terms of global consolidation, its a case of just one more move to the inevitable super conglomerates – hidden behind liveries and marketing perceptions.