On July 27th, Air France-KLM, Delta Air Lines, and Virgin Atlantic announced their intentions to create a new transatlantic joint venture (JV), with Delta taking a 10% equity stake in Air France-KLM, and Air France-KLM taking a 31% stake in Virgin Atlantic. This new agreement will replace the current Air France-KLM, Delta, Alitalia JV, and the new agreement will expand the number of daily flights available to customers traveling across the Atlantic from 270 to around 300. With this new JV, the airlines are looking to become an even more formidable force in the transatlantic market, challenging the dominant International Airlines Group (Aer Lingus, British Airways, Iberia, LEVEL) – American Airlines JV and the A++ transatlantic JV between Lufthansa Group (Austrian Airlines, Brussels Airlines, Eurowings, Lufthansa, and Swiss), Air Canada and United Airlines.

The new JV will have hubs in some of the world’s largest, busiest and most important airports — Paris Charles de Gaulle, Amsterdam Schiphol, London Heathrow, New York JFK, Los Angeles and more. Given the importance of these cities in the world market, Air France-KLM Chairman and CEO Jean-Marc Janaillac says the JV will be “the number one alliance between Europe and the United States in terms of traffic.”

Flight attendants from the four airlines pose in this file photo. Photo Credits: Delta Air Lines

For passengers, the most noticeable differences will be the ability to book flights on different carriers through one website, as well as operation consolidations in hub cities. At London Heathrow, Delta and Virgin Atlantic operate out of Terminal 3, while Air France and KLM operate out of Terminal 4, so it is likely that Air France and KLM will move their operations to Terminal 3 once the JV has been put into place.

However, the JV’s aspirations do not end there, with KLM’s CEO Pieter Elbers starting on July 28th to reporters that the airlines involved in the JV are “open to accepting more partners into the arrangement.” In addition to the deals taking place between the European and North American airlines, China Eastern Airlines took a 10% stake in Air France-KLM on the same date as the other transactions were announced, strengthening the JV between the airlines signed in 2016. Delta took a 3.55% share in China Eastern Airlines in 2015.

A China Eastern Airlines Boeing 777-300ER. Photo Credits: Tripadvisor

Air France CEO Franck Terner said that Air France-KLM is looking to combine its two JVs with China Eastern Airlines and China Southern Airlines into a single JV. China Eastern and China Southern started formally cooperating in 2008 when the airlines signed a framework agreement to cooperate in sales, aircraft procurement, ground service, facilities and other fields. Both are members of Skyteam, with China Southern joining in 2007 and China Eastern joining in 2011.

In addition, Delta Air Lines recently signed JV agreements with Skyteam partners Korean Air and Aeromexico, and is looking to take a 49% stake in the latter, similar to its moves with Virgin Atlantic.

With Elbers stating that Air France-KLM and Virgin Atlantic will become “the European pillar of something spanning the globe,” it is likely that the moves by Delta and Air France-KLM are with the goal of bringing more airlines into the new JV, spanning the globe and forming what could potentially operate as a global airline.

Featured image by Air France-KLM.

Categories: Industry Talk