Virgin Australia Drops Delta, Will Partner With United Instead

Virgin Australia is strategically important because they’re one of two significant airlines in Australia. Qantas is closely tied through a joint venture with American Airlines. So most airlines outside of the oneworld alliance (and Emirates) go looking for domestic feed for their long haul Australia routes with their competitor, Virgin Australia.

Virgin Down Under has been linked with Delta Air Lines through a joint business venture, leaving United Airlines in the cold. Its Australia flights have largely had to survive on local market passengers, rather than connecting people from all over Australia.

That’s changing. United and Virgin Australia just announced a partnership set to begin “in early 2022.” And Virgin Australia will no longer partner with Delta.

The United-Virgin partnership will offer:

  • Earn and burn miles across both airlines. United MileagePlus members will be able to use United’s flights from San Francisco and Los Angeles to Sydney (as well as Houston and Melbourne routes once they return) and connect onward to other destinations in Australia as part of the same award.

  • Reciprocal elite benefits including priority check-in, boarding, baggage, and security as well as extra baggage allowance and lounge access

United even notes that Virgin Australia will start selling United codeshares on its website and only then begin selling other airline partner codeshares online.

Virgin Australia used to be a great partner to have for redeeming Delta miles on flights between the US and Australia. Half a dozen years ago it was possible to get multiple business class redemption seats most of the time across several routes. Shortly afterward they began limiting availability to within two weeks of travel most of the time, severely curtailing redemption options between the U.S. and Australia because they had been the primary way to redeem at the saver level.

Those days are long gone and post-bankruptcy Virgin Australia isn’t flying to the U.S. Delta suspended its joint venture when the airline ceased serving Los Angeles a little over a year ago. Now United makes more sense for them as a partner because Delta had just a single U.S. flight while United gives them greater reach into the States. And this gives United a domestic Australian partner.

Virgin Australia, by the way, became an Air Canada Aeroplan partner earlier this year so the move isn’t entirely surprising.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. This is a big loss for Delta. United owns Asia-Pacific now, which is amazing considering it wasn’t that long ago when Delta had a hub in Tokyo-Narita serving a comprehensive intra-Asia network. Delta’s bet on Korean Air and communist China-owned China Eastern has not materialized.

  2. Given that American has a partnership with Qantas but still has reported the weakest results – including not operating passenger flights for parts of the pandemic – there is hardly correlation that not having a JV will hurt DL or having one helps other airlines.

    As for the “Asia” part of Asia- Pacific, for months during the pandemic, Delta has operated as much transpacific capacity as United.

    Not having a partner in Japan has allowed Delta to focus its Tokyo service on Haneda airport which has resulted in higher average fares while AA/JL and UA/NH are trying to operate flights out of two airports and support a hub at Narita.

    Delta and Korean were the 2nd and 3rd largest carriers across the Pacific pre-pandemic. Covid interrupted their progress but if you think that AA or UA can duplicate at Tokyo or any other city what Delta can do in Seoul w/ Korean, you will be in for a rude surprise.

    Let’s also not forget that Delta now operates the most fuel efficient fleet of the big 3 which will matter a whole lot as Asia traffic reopens. Fuel is not going back to the $40s again; having AA and UA burning 25% plus more than Delta per seat will show up whether anyone in the public wants to admit it. Whether AA and UA use their 777s to Asia or elsewhere, having a much less efficient international fleet will hurt their results compared to Delta.

    Finally, Delta generated the highest profits of any US airline across the Pacific, far higher than United while American has lost billions flying the Pacific for over a decade. Airlines aren’t charities. If their strategies don’t make money, they mean nothing. The chances are high that Delta’s profitability premium to Asia above AA and UA will grow as Asia traffic reopens

  3. @Tim Dunn You must work for Delta. That’s just absurd.

    Delta doesn’t fly to Singapore, Hong Kong, and Taiwan. What high airfare-buying business traveler is going to fly through Seoul if there’s a nonstop to Singapore or Hong Kong on United or another competing airline?

    Does anyone think the days of business travelers buying $7,000 Delta One business-class airfares is going to resume anytime soon? United is kicking Delta’s butt on Polaris and its business-class lounges. Delta has decided not to offer that. Have you been in a Sky Club lately? The booze is $5 booze and you can’t even get a seat because the lounges are as crowded as 2019, thanks to two years of elite status extensions. If I’m paying $7,000, I’m not flying Delta.

    Then there’s the ongoing spat (to put it mildly) between China and the United States that is only going to intensify.

    Pulling out of Narita also cost them Japanese leisure routes to Hawaii and the other islands, where Delta had a sizable base of customers.

  4. @Tim Dunn – Yes, Delta got a windfall at Haneda… a government handout. The A350 is fuel efficient but probably too large. And connecting traffic over Seoul isn’t going to be great for winning high yield business throughout Asia.

    Throwing out all the stuff that’s strong about Delta is more or less a non-sequitur to their competitiveness in Asia.

    Which is only relevant to this post because you want to suggest an Australia JV doesn’t matter… which it hasn’t during the pandemic… and the AA/QF deal was only just approved. And Delta is left without a dance partner in Oz.

  5. @Diamond,
    if you think that using widebody aircraft on leisure routes is the best use of an airline’s assets, you would be severely disconnected from financials.
    if you think that United is getting a revenue premium over Delta, you have no clue that the route specific metrics for Delta and United are very similar in most parts of the world. Delta just happens to put more seats on a plane and offer a better experience for coach passengers while United goes overboard on the premium cabin and doesn’t get a revenue premium for its product.
    International premium travel is heavily negotiated; United deeply discounts the pricing on its premium cabin pricing. Asian carriers offer far better service than United and have far lower costs.
    Asia is heavily shut down right n ow.
    Delta and United are operating the exact same number of flights to China under China’s covid restrictions. United’s pre-covid advantage to China will probably be permanently lost.
    Since you missed it the first time, Delta and Korean were the 2nd and 3rd largest airlines across the Pacific pre-covid and have far greater growth capacity via Seoul while Delta has the most privileged position in Tokyo of any US airline.

    You also ignored or missed that Delta made far more money flying the Pacific pre-covid than United which was far larger. The same was also true for the Atlantic.

    Now add in that Delta has a far more fuel efficient international fleet and Delta’s profitabililty gap above United will grow.

    Whether you can accept it or not, Delta has demonstrated that it has demonstrated a better ability to make money – which is what American, Delta and United all exist to do.

    Facts not bias come to those conclusions.

  6. @Gary,
    Delta’s access to Haneda was because they didn’t have a joint venture partner in Japan. The DOT has pretty consistently made it clear that it favors non-allied carriers in route proceedings and American and United knew it in the Haneda route application process – and unsuccessfully argued against the DOT and DOJ’s logic. Delta will have more access on its own metal to Haneda.

    Given that the A350-900 in Delta’s configuration seats the same number of seats as American’s 777-300ER and about 20 seats more than AA has on their 787-9s and the DL A350 has 40 less seats than UA has on their 777-300ER (and burns 1/3 less fuel), the issue is not size at all.

    Delta has one ultra long range capable aircraft type that fits in between AA and UA’s 2 types and the A350 is far more efficient .

    The only reason I addressed Asia-Pacific as a whole is because of of Diamond’s comments which he would have been better off not bringing into the conversation if he knew the facts.

    and of course JVs don’t matter – because Qantas has been shut down and Virgin Australia won’t return to the US – and United is not going to sign a JV with a carrier that solely provides connecting flights.

    Also, you do realize that international itineraries are full of interline connections that are not part of JVs or even codeshare arrangements? Delta isn’t and won’t be prevented from booking domestic connecting itineraries on intra- Australia flights just as United and American can and do sell non-codeshare services on Korean beyond Seoul.

  7. Tim Dunn – I think what you miss about United though is that their ability to provide nonstops into many key Asia/Pacific markets from hubs where there is a lot of O/D demand (SFO in particular, but also LAX and EWR to some degree) has given it the ability to earn a revenue premium on international. United also has a ton of 787s which are plenty fuel efficient, and their assortment of 787s/777s for trans-Pacific gives them flexibility.

    The advantage that Delta has though is that Korean Air is more efficient cost-wise than ANA and Japan Airlines, and Korean Air will soon absorb Asiana and be a very significant player in trans-Pacific. But relying on one-stop (or even two-stop) is less likely to earn you a revenue premium over nonstop, which United is able to get from it’s many corporate clients. The question is when business travel resumes to Asia/Pacific.

  8. The problem w/ your theory is that Delta and United get similar average fares to the same cities outside of each other’s direct alliance partner hubs. There simply is no revenue premium to most of the cities that you think there is. Delta and United also consistently get more revenue per seat on their international networks than American. It is American that has a fare deficit on its international network with the only real advantage to London.
    And Delta is now going to gain a larger average fare premium to Tokyo and have more seats via Seoul – which you accurately note is a lower cost and more efficient hub than Tokyo.
    China demand is simply not going to return anytime soon and Delta and United are operating the same number of flights to China right now because of Chinese government restrictions.
    Hong Kong is off the table – American is exiting the market.
    You are down to Taiwan and Singapore that United serves but Delta doesn’t. and Osaka if Delta doesn’t go back. All of the big cities are covered.

    And, according to data which US airlines file with the DOT, the A330 – in both variants – and the A350 cost less to operate per seat than every aircraft in United’s fleet except for the 787-10.

    United has scores of 777-200ER and -300ERs which cost much more to operate that the A330 and A350. If United uses its 787-9s to Asia, the gap with Delta is not as large but the 777s will fly somewhere on United’s network and the cost advantage to Delta will be larger there.

    Again, whether you agree with the logic or not doesn’t change that Delta has consistently been more profitable domestically and internationally than United. The positive gap that Delta has had will grow, not shrink.

    None of which addresses the question of how United served interior cities in Australia without a partnership. Of course they served those cities via interline connections – the same way that Delta will serve those same cities now.

  9. btw, those of you that would like to verify the profitability by global regions statements can type this phrase into your search engine and the appropriate Bureau of Transportation Statistics table (which you can query via dropdown menus) will come up
    “Net Income (In Thousands of Dollars $000) All U.S. Carriers – All regions”

    and my post won’t get hung up by posting a link.

    In 2019, Delta made $300million flying the Pacific while United lost $84M and American lost $380 million, not much more than it did in 2020 when it flew far less capacity.
    Through the 3rd quarter of this year, Delta was profitable flying the Pacific – not so much for American or United.

    The data is there for you to use.

  10. Why do we salivate over these cartel deals with antitrust immunity? A price-fixing tie-up with Virgin will make United even more expensive.

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