Written by Benjamin Bearup

MIAMI – Delta Air Lines and fellow SkyTeam partner, Korean Air, officially signed a joint venture (JV) agreement at Los Angeles on Friday afternoon.

It will become a major contender in the trans-pacific market against longstanding joint ventures of similar size and scale, such as American Airlines and Japan Airlines (JAL) and United Airlines and All Nippon Airways (ANA).

Delta has been seeking a stronger partnership with an Asian carrier for decades, and while the obvious answer always presumably seemed to be Korean Air, given that both were founding members of the SkyTeam alliance back in June 2000.

The two carriers had strained relations until they announced a breakthrough in their partnership last Fall; and also, signed a Memorandum of Understanding (MoU) in March 2017 to implement the joint venture agreement.

As part of the joint venture, Delta and Korean will share costs and revenues on flights within the JV. Other aspects of this include:

  • Expanded codesharing in the trans-Pacific market
  • Joint sales and marketing initiatives in Asia and the United States
  • Colocation at key hubs with seamless passenger and baggage transit experience
  • Enhanced frequent flyer benefits, providing customers of both airlines the ability to earn and redeem miles on Delta’s SkyMiles and Korean Air’s SKYPASS programs
  • Increased belly cargo cooperation across the trans-Pacific
  • A combined network serving more than 290 destinations in the Americas and more than 80 in Asia

Analysis: Delta and Korean Air Have Agreed to a Joint Venture

“Together, Delta and Korean Air are building a world-class partnership that will offer more destinations, outstanding airport facilities and an unmatched customer experience on the trans-Pacific,” said Ed Bastian, Delta’s CEO.  “By combining the strengths of our two companies, we are building a stronger airline for our employees, customers, and investors.”

Delta Korean JV3_0

“Now is the right time for this JV. The synergies we’re creating will build stronger and more sustainable companies, and this is good for travelers, our companies, and our countries,” said Korean Air Chairman, Y.H. Cho.

While Delta and Korean have been alliance partners since they both launched the SkyTeam alliance in 2000, they have not always seen eye to eye. For many years, Delta and Korean fought over whether or not to create a joint venture. It was widely believed that Korean Air officials were reluctant to partner with Delta on a joint venture as Korean would benefit less from the relationship.

After years of tension between the carriers, Delta eventually found relief in inheriting Northwest’s Tokyo-Narita hub. From 2008 onwards, Delta operated a sizable network from Tokyo-Narita to its many United States hubs and several Asian countries using 7th freedom rights.

Delta and Korean Air infographic-1

As the years went by, Delta began to unwind their Tokyo-Narita station and look for alternatives in Asia.

In July of 2015, Delta announced an investment of $450 million for a  3.55% stake in China Eastern Airlines. At this time, many believed that Delta had found their partner in Asia. Since the acquisition, Delta had been quiet regarding their Asia plans until now.

In an earlier announcement between Delta and Korean Air, the two carriers announced Korean would operate a third daily flight to LAX and a second daily flight between San Francisco and Seoul, and Delta would launch service from Atlanta to Seoul. The Delta flight to Atlanta is in addition to Korean’s daily flight to ATL.

It is unclear which cities and countries will be covered by the JV agreement, but Delta has hinted at 33 Asian destinations in prior media communications. The Korean Air network is very robust in mainland China, as well as Southeast Asia, Japan and domestically within South Korea.

Furthermore, Korean Air will offer nearly 18 peak day flights between the U.S. and Seoul with the additional frequencies to San Francisco and Los Angeles. Korean Air also operates daily services to Toronto and Vancouver in Canada, which may also be included in the JV, but it is unknown at this time.

Elsewhere in the U.S., Korean Air flies to Atlanta, Chicago O’Hare, Dallas/Ft. Worth, Guam, Honolulu, Houston, Las Vegas, New York-JFK, Seattle and Washington Dulles. Delta operates daily services from Atlanta, Detroit, and Seattle to Seoul.

The JV may offer up the potential for smaller markets such as Portland and Minneapolis/St. Paul to receive a nonstop link to Seoul Incheon, or for the U.S. to be connected to a secondary South Korean market such as Busan.

Delta and Korean Air have expanded their codeshare agreements extensively in recent months.  Delta currently places its code on 655 weekly Korean Air flights between Seoul and numerous short and long-haul markets, including North America flights.

Delta is now carrying Korean Air’s code on over 4,300 weekly flights, primarily on domestic short-haul markets, but also on nonstop U.S. – Asia pairs, as well as a few routes from its U.S. hubs to Latin America.

It will be worth watching if the transpacific JV eventually grows to include AeroMexico, which recently launched service from Mexico City to Seoul, and also is now 49% owned by Delta.

Furthermore, it remains to be seen whether Korean Air maintains its codeshare agreement with American Airlines, which commenced in early 2015. Korean Air places its code on American’s flights from Dallas/Ft. Worth to Seoul and on the return sector, which enables both carriers to sell onward connecting itinerary tickets.