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Delta's Partnership with Virgin Blue Causes Pain for United in Australia

When Delta announced that it was hooking up with Virgin Blue for a joint venture between the US and Australia, I thought it was a smart move. It will allow them to rationalize capacity between the US and Australia while potentially creating a strong third competitor to United and Qantas. Now it appears it will have another impact as Virgin Blue has decided to sever its current codeshare with United.

I said on Cranky that I didn't think Virgin Blue would want to end the partnership:

I can't imagine Virgin Blue would cancel this deal, but I wonder how United will feel about it. They may very well need the traffic, so it's possible it could stay, but that would make for an odd arrangement.
I was clearly wrong. My guess is that Delta put the pressure on this one, but it could also have been a strategic move. This does deprive United of some connecting traffic to feed its flights from Australia to the US, and it cuts off United's ability to offer its US customers connections beyond Sydney and Melbourne.

And United has a lot of coach seats to fill so this can't be good news for them. The airline uses its 747s on the route because those are the only ones that can carry a full payload on that haul. And the 747s have two strikes against them. One, they have a far inferior product in coach than any other airline on the route and two, they have a ton of coach seats to fill. There are 240 Economy Minus seats on the 747. The 777, for example, has only 197 combined Economy Plus/Minus seats, so that's a huge difference. And the 747s are the only airplane in the long haul fleet that still lacks personal screens in back.

With the big increase in capacity on this route, everyone is scrapping to fill seats. United can't compete on product in coach so it's going to have to rely on price. That's not good.