The Delta and Korean Air Relationship Begins to Thaw

It seems strange to be talking about any kind of thawing of relations in Korea considering what North Korea has been up to lately, but of course, this is a different kind of thawing. After years of strained relations, it sounds like Delta and Korean Air are on a path to reconciliation. And the first big public step was taken last week when the airlines jointly announced increased codesharing and new service.

Delta and Korean Relationship Thawing

The basics of the announcement are as follows:

  • Delta will begin flying nonstop from Atlanta to Seoul/Incheon daily next June 3. This will be in addition to the flight Korean already operates in the market.
  • Korean will begin codesharing on the new Delta flight as well as on flights beyond Atlanta, Los Angeles, and New York to 115 places in the US and Canada.
  • Korean will put its code on the Delta flights from Atlanta and New York to Sao Paulo. This is useful since Korean is ending its own flight to Sao Paulo (via LA).
  • Delta will put its code on more destinations beyond Seoul, now 32 different places with new destinations including Taipei, Osaka, Singapore, Nagoya and Okinawa.
  • Delta will put its code on Korean’s flights from San Francisco and Houston to Incheon

As you can see, there’s a lot here. But what isn’t here is any kind of joint venture operation or restoration of elite and bonus SkyMiles benefits for people flying on Korean-marketed flights. I would imagine those would be the next steps if this truly a reconciliation. But for now, all we can do is read the tea leaves.

At first I assumed this was transactional, more about solving specific need as opposed to repairing a broader relationship. After all, Delta is pulling down its Tokyo hub and is finding it harder to serve certain places in Asia. At the same time, it wanted to beef up its Atlanta operation to Asia, but it couldn’t do it without more feed. Korean, meanwhile, wanted more feed for its flights in the US.

Upon further review, however, it seems like there could be something deeper here. Most notably, look at Atlanta. This past summer, Korean started by flying a mix of 777s and 747-8s on the route and then went to a mix of 777s and A380s. At the beginning of September, that went down to all 777s, but next year, there is no upgauge back to the A380. Korean is keeping a lid of capacity next summer, just in time for Delta to enter, and this didn’t just happen. That sounds like there were some real, meaningful discussions over time.

You might think this sounds like illegal capacity coordination, but it’s not. Remember, even without a joint venture, Delta and Korean have had anti-trust immunity since 2002. They can talk to each other about anything if they want. They just haven’t wanted to for some time.

Maybe Delta under new CEO Ed Bastian is kinder and gentler? If so, that’s the best news of all. If they’re talking and coming to terms on agreements like this, then that could lead to something greater down the road. Undoubtedly there are most obstacles to be overcome, but you have to at least start talking to get there.

And as a starting point, this is great since there is real benefit for both.

Korean has long made hay flying travelers between the US and China. But the avalanche of new service by Chinese carriers in secondary Chinese markets to the US has to be causing concern. This codeshare is going to help Korean fill more seats (if necessary) by taking people deeper into secondary US cities, or even primary ones. It’s crazy that today, Korean has no codeshare into cities as large as Miami.

And of course, Delta has struggled with finding a way to replace its fading Tokyo hub. Remember, Delta just announced it was canceling service from Tokyo to Osaka and Bangkok. That meant that there would be no way to get to Osaka on a Delta code. (Delta already codeshares to Bangkok with both Korean and China Eastern.)

Now, however, Delta can do it via this Korean codeshare through Incheon. Keep in mind, the only cities that Delta continues to serve from its Tokyo hub in Asia are Manila, Shanghai, Singapore, and Taipei. Those latter two will now be reachable via Incheon on Korean metal as well, just like Osaka. Could this be foreshadowing more Tokyo cuts? Possibly, the relationship really is on the mend.

It would seem to me that the startling inability to earn elite and bonus SkyMiles on Korean flights would be the next hurdle to overcome. If that happens, then the really hard work starts: working on a joint venture. It’s not clear to me that they can get to that point, but chances appear better now than they have been in years.

(Visited 3,509 times, 1 visits today)

Get Posts via Email When They Go Live or in a Weekly Digest


Join the Conversation

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.

32 Responses to The Delta and Korean Air Relationship Begins to Thaw

  1. Nick says:

    The return flight to ATL seems to be really late to make connections a bit tight…

    • Nick – Perfect for the Sao Paulo flight! Actually, Delta has a big bank leaving after 10pm for flights around the southeast. It’ll connect nicely.

  2. Neil S. says:

    Do I get MQM and MQD on KE metal if it’s a DL codeshare/flight number?

    • Noah Kimmel says:

      if you book it as a DL marketed code, you get credit. It is when you book it as KE that the skymiles are utterly neutered.

  3. Mike says:

    These things take time to plan, but the timing of these announcements comes pretty quickly after the last of the HND route awards. It may be sinking in that ICN is DL’s best hope for a northeast Asian hub (PVG is a bit too far south to serve the secondary Japan markets).

  4. EC says:

    I believe this sentence should read: “Possibly, if the relationship really is on the mend.”

  5. stan says:

    ATL-ICN is about 300 miles farther than ATL-NRT, and as far as flights continuing to china, thailand, and wherever else in SE asia, it seems like ICN is a no-big-deal replacement for NRT.

    interesting moves here. as a DL flyer lets hope the mileage earning gets to where it needs to be

  6. David SF eastbay says:

    Seems DL figured out Japan doesn’t care if DL dismantles it’s NRT hub so it needs to suck up to KE now to better compete with UA and AA in the Asia market.

  7. Richard says:

    Could the increase in codesharing have anything to do with the pilots negotiations? Trying to eliminate some long haul flying even with the flights from ATL. Their Tokyo pull down has to net them a TRANSPAC net loss in flying.

    • Richard – I can’t imagine so. Chances are that those Tokyo flights are going away either way. So all this does is allow them to reintroduce an Atlanta-Incheon flight thanks to additional feed opportunities.

      • Tim Dunn says:

        Delta will almost certainly retain Tokyo flights from Atlanta, Detroit, and Seattle on a long-term basis. Atlanta to Tokyo existed before the NW merger. I wouldn’t be surprised if Delta reintroduces JFK to Haneda when slots become available. Let’s remember that American and United each have just one HND flight on their own metal. Even by the Japanese government’s goals, Haneda will become the hub for long-haul premium routes for Tokyo with Narita as a low cost carrier hub. All carriers between the US and Japan want more Haneda service and AA and UA labor cannot accept a disproportionate number of their Tokyo flights being operated by their joint venture partners

  8. I’m also curious how much, if any financial weakness on KE’s side is driving this.

    They’re in the same group as Hanjin shipping, which just recently filed for bankruptcy. While I’m not sure of the exact nature of the financial interlocking, it might be affecting KE in some way that they’d want to adjust their commercial strategy.

  9. Doug Swalen says:

    Your parsing of how bad off Delta’s Tokyo hub is…is curious. I guess if you want to get technical about what constitutes Asia and what doesn’t, leaving out Guam and Koror off the list of Asia service from Narita might be accurate from a hair splitter’s point of view but it does mean that instead of saying that Delta still serves six cities from Narita, it only serves four. And Koror has been upgraded from seasonal to full time.

    Granted, most biz class passengers aren’t going to be interested in flying Delta metal to Koror (unless their business is scuba diving) or Guam (unless their business is in the hotel industry) but you didn’t frame this as a carve out for biz class traffic.

  10. Scott says:

    DTW seems conspicuously absent from this announcement… particularly DTW-GRU.

    • Scott – Not sure what you’re looking for, but Korean already codeshares on the Delta-operated flight from Detroit to Incheon. I don’t know why Korean would want to connect passengers via Detroit on two Delta flights. They’ll get a lot more money by actually operating one of the flights via Atlanta or New York.

  11. TC99 says:

    Quote-“It’s crazy that today, Korean has no codeshare into cities as large as Miami.”

    I have flown KE to Manila from Miami and FLL a few times in the past few years. They have partnered with Delta (outbound/inbound through Atlanta-2012), JetBlue (outbound through JFK 2013-15) and American (inbound through Atlanta 2013-15). All miles were earned through KE’s Skypass Program. I purchase tickets using travel agents that are bulk ticket consolidators.

    After the freezing of relations in early 2013, you van see the KE has adapted using other airlines in the USA that are not members of Skyteam. Not planning on flying this year due to health concerns of my wife, but hoping her battle is successful and we can visit our teenage son next year. I have found transiting Incheon is a lot better than Osaka or Nagoya which NW and DL flights I have flown in the past since 2000. It was a pleasant surprise the first time I flew KE in the way the flight crews operated and treated the passengers vs. the surly manner of the experienced NW/DL crews. I only had a few NW/DL crew members that were polite and went out of their way to help and these were the less experienced (seniority) whom were not the regulars on these international itineraries.

    And the airlines (Big 3) wonder why there is a lot of Americans who prefer to fly non-US Flag carriers on the TPAC/TATL routes

  12. Carl says:

    I wonder if DL is starting to question if MU and PVG can actually fill some of the voids left when NRT is finally de-hubbed. Whether that’s MU operation, the lack of progress for Open Skies with China, timing of the de-hubbing, etc??.

    I would think that SEA and LAX could pick up some of the pieces left by NRT, and wouldn’t ICN pick up the rest (even better than PVG)?

    • Carl – I think the lack of open skies is the biggest concern, especially since there can be no joint venture until the skies are open. Seattle has already picked up many of the pieces. Heck, that allowed Delta to drop the San Francisco-Tokyo flight awhile back and flow them north. But some of the markets that it no longer would serve if the Tokyo hub closes will be tough from anywhere. Taipei? That’s a low yield market with a lot of capacity. Every US carriers has struggled in that market historically. And Manila? Same thing but even worse. Might be tough to fully replace it without a joint venture partner somewhere over there.

  13. Tim Dunn says:

    1. Joint ventures so far haven’t changed the competitive environment to East Asia even where they exist. Delta is still number 2 behind United and ahead of American in network size, average fares, cities served with its own metal. Even with a JV/JBA, American is a distant number 3 to Japan
    2. No carriers have been growing between the US and Japan and the gradual opening of Haneda is certain to continue if not accelerate that trend. Delta now has more mainland US to Haneda access than American or United and data for existing Haneda flights shows that Delta will very likely get a higher percentage of the local Tokyo market than American or United do or will because Delta has no obligation to feed partner flights beyond Haneda.
    3. Korean has a sizeable presence from secondary Japanese cities; Seoul is well-positioned to serve those markets to the US just as KLM effectively serves secondary UK cities.
    4. It is no secret that Delta and Korean had ideological differences because of Korean’s practice of carrying huge amounts of traffic between the US and China and of undercutting Delta from Delta’s major markets including Atlanta and New York. Korean couldn’t support two flights per day from Atlanta if it didn’t price its product well below Delta. Delta cut off US codeshares to Korean in part to prevent Korean from benefitting from the feed at Delta hubs. Korean also sees Delta and the industry’s growth of US to China capacity as a threat despite the fact that S. Korean airlines limited the ability of Chinese airlines to develop their networks. Delta’s statements that it wants to restart Atlanta to Shanghai is a threat to Korean in Atlanta that KE can’t ignore.
    5. Seoul Incheon is a great connecting airport but Delta’s lead in the local market is only strengthened with now three US to Seoul flights. Korean was obviously willing to give up some of its own capacity in order to allow Delta to grow and as noted they have ATI to be able to do it. They clearly see far more value from gaining a large amount of feed in the US that they need to compete against other airlines and partnerships. Although codeshare schedules aren’t yet published, Korean’s codeshares on Delta’s domestic network will likely be one of the largest between a US and Asian carrier. Talk about 0-100 mph.
    6. Delta’s Atlanta hub provides very solid access to Latin America and Korean knows it needs to have a presence in that market segment.
    7. Delta has said they won’t grow Seattle international until there is a new international arrivals facility.
    8. While Delta and Korean might have each recently reached the greatest need to work together and decided to cooperate with each other, Delta’s Pacific network is still ‘undergoing remodeling.’ It doesn’t hurt Delta’s dealings with other partners to know that Delta does have a credible means to grow its presence in the Pacific via increased partnership with Korean.
    Delta and Korean increased their cooperation because it makes sense to do so. This is a nice step forward that both DL and KE need. I am hopeful there will be no sand throwing on the playground but I think DL and KE can meet their needs with or without a joint venture

    • CF says:

      Tim – Lots of good stuff here. Just one comment on the first point. My understanding is that part of the problem with JVs not gaining ground is an unwillingness by Asian and American carriers to really get close and reap the benefits the way the Europeans and the American have. Whether it’s cultural or something else, I don’t know (but that’s my guess), but that’s hindering true cooperation.

      • Tim Dunn says:

        I believe you are exactly right. Asia is not a single aviation market like Europe and there is still alot of competitiveness between Asian carriers. Asian countries are not as similar economically as European countries are.
        Not everyone realizes Korean is the largest Asian carrier across the Pacific and about 35% larger than JAL. Only United and then Delta are larger. Delta and United understand the value of cooperation with foreign airlines for mutual benefit. I’m not so sure Korean sees the benefits as much as they see the control they have to give up in order to be a part of a ‘joint’ anything

  14. In Tokushima says:

    DL flies to Osaka/Kansai from Honolulu, so while connection times may not be optimal, one can fly from the US mainland on DL flights from various cities to Osaka that way.

    • CF says:

      It’s a pretty terrible, long (sometimes overnight) connection with a circuitous routing, but it’s technically possible. The flight from Osaka gets to Honolulu at 916a. First connection to LA is at 241p, Atlanta is 402p, Seattle is 840p. LA is better at some times of the year, but the others aren’t.

      Meanwhile the fight from Honolulu to Osaka leaves at 125p. Delta can get you from LAX at 1127a, but any other flight arrives too late to make a same day connection.

  15. Gary Bisbee says:

    Korean Air is an Alaska partner. Could that be the reason for the thaw?

    • Tim Dunn says:

      Alaska has a codeshare and FFP relationship with virtually every airline that operates longhaul international flights from Seattle including Delta. Airline members of alliances generally cannot cross alliance lines (there are exceptions) but Alaska like JetBlue is not part of any alliance and feeds airlines of many alliances as well as those outside of alliances. Korean’s practice could have been an issue for Delta and it is possible that Delta is requiring Korean to remove its code from Alaska flights… don’t know but not an unreasonable request.

      As to the comment below regarding pricing via the Middle East, that is precisely why the US big 3 see the ME3 as an issue that is larger than just India and the subcontinent.

  16. Alex Kim says:

    Interestingly enough, if you check AtlantaSingapore or Shanghai flights for the Summer of 2017, cheapest (and usually the best) connections will be via Qatar Airways or Turkish airlines.
    So transpacific flights are no longer the only option

  17. hk says:

    Korean air has a weird elite system, requiring 30k miles from its own metal and 20k from everything else (skyteam and other partner airlines, credit card, chase UR transfer). DL is playing fair in that KE mile is worth as much as credit card points, and that’s what KE has been doing so far. KE needs to do some action, for instance, 30k of KE own and DL combined, and 20k all others. Only then DL would move.

  18. ScholarChanter says:

    As for Hanjin, the bankrupcy mainly just dumps the debt obligations onto the government – it does not directly affect KE

Do NOT follow this link or you will be banned from the site!