Delta Air Lines (DAL) has recently entered into a partnership with China Eastern and China Southern airlines. The agreement will allow code sharing between Delta and both the Chinese airlines to serve more flights to customers.
Per the agreement, both the Chinese carriers will place their codes and flight numbers on Delta flights operated between Seattle and Beijing. Additionally, China Eastern can access Delta carriers flying between Detroit and Beijing.
In exchange, Delta can expand into the China market by accessing China Eastern flights on the New York and Los Angeles to Shanghai route as well as China Southern flights between Los Angeles and the Guangzhou network.
Delta Air Lines continues with its effort to expand domestic and international flights through various partnerships. We believe that the new deal will attract new alliances and expand Delta’s network in China, thereby adding revenue streams from one of the world’s fastest growing travel markets.
China is expected to be the biggest contributor to global air traveler through 2014. We believe the company’s global network, hub structure and alliances with other airlines enable it to offer customers an improved global reach compared with other domestic and international airlines.
Apart from the Asian carriers, Delta Airlines also partnered with the largest Mexican airline Grupo Aeromexico to boost its network capacity in Mexico. In Brazil, the company is expanding its flights with a new destination from its Minneapolis-St. Paul hub.
In addition, Delta intends to acquire a minority stake in GOL Linhas Aereas Inteligentes and is awaiting approval from the board of directors of both the companies. When approved, Delta will be able to use its code for GOL flights in Brazil, the Caribbean and South America.
Further, Delta Air Lines is strengthening its footprint in New York by increasing more than 100 flights and 29 destinations at New York’s LaGuardia by the middle of the year to take advantage of the 132 slot pairs gained from a slot-swap deal with US Airways. The number of daily flights in and out of New York will increase to 264, covering 60 cities by summer 2012. The additions will make Delta the largest airline, operating between the New York City and other parts of the U.S and will strengthen its competitive position against United Continental (UAL), American Airlines, the subsidiary of AMR Corporation and US Airways Group Inc. (LCC).
Currently, we maintain our long-term Neutral recommendation on Delta Air Lines supported by the Zacks # 3 Rank (Hold).
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