Delta, Korean Air in joint venture talks to deepen alliance

Seoul/Singapore: Korean Air Lines Co. is in talks with Delta Air Lines Inc. for a joint venture in a move that would give the second-largest U.S. carrier a bigger foothold in Asia where rising incomes are fueling a boom in air travel.
Details of the partnership would be disclosed later, the Asian airline’s President Walter Cho told reporters at a briefing in Seoul’s Incheon Airport Monday, declining to elaborate. A Delta spokesman in Tokyo didn’t immediately respond to an e-mail seeking comments.
Atlanta-based Delta, which has said it will rely on tie-ups in Asia to improve connectivity to the region’s largest economies, is extending an existing pact with Korean Air beyond code-sharing. While a joint venture will provide the U.S. carrier a hub in Seoul and help it compete with other U.S. rivals, its partner could get greater access in North America as South Korea prepares to host the 2018 Winter Olympics.
Delta and Korean Air in September agreed to expand their code-sharing partnership by increasing destinations that can be shared among their passengers, with a combined 142 locations in the Americas and 33 in Asia. Delta and Korean Air are two of the four founding members of the SkyTeam alliance established in 2000.
In an aviation joint venture, airlines typically share revenue and costs on a given route, no matter who is flying, according to the International Air Transport Association.
Shares of Korean Air fell 1.7 per cent to 28,300 won as of 3:04 p.m. in Seoul, giving the carrier a market value of about $2 billion.
Delta, which counts Warren Buffett’s Berkshire Hathaway Inc. as its top investor, is positioning itself for expansion in Asia. China is set to overtake the U.S. to become the world’s largest aviation market by passengers by 2024, according to IATA.
In 2015, the U.S. carrier bought a 3.6 per cent stake in state-owned China Eastern Airlines Corp. for $450 million and later extended the cooperation to cover code-sharing, revenue management, scheduling, sales and frequent-flier programs.
Incheon airport, which serves Seoul, is expected to start operating its second terminal as early as end-2017 to help increase its annual capacity to 62 million passengers from the current 44 million. The airfield has three runways. Korean Air is expected to operate from the new facility.