Air France and Delta finalize joint venture

Posted by admin on May 21, 2009
A Boeing 777 in Air France’s new livery. Photo courtesy Air France
Air France/KLM and Delta yesterday put the finishing touches on a $12 billion-a-year joint venture deal that would allow them to operate as a single carrier on North Atlantic routes. The pact extends a previous joint venture that KLM and Northwest have had since 1997. Air France merged with KLM in 2004, and Delta recently took over Northwest, allowing for a four-way alliance (all are already members of the SkyTeam alliance).

The deal is a revenue- and profit-sharing venture, and will have antitrust immunity (something that American and British Airways are seeking right now). It affects more than 200 daily transatlantic flights to over 400 destinations in Europe and North America, or around 27% of total trans-Atlantic capacity. It also allows them to more effectively combine operations. For example, if both Delta and Air France have a flight from New York to Paris, but both flights are only 1/3 full, they can be combined and flown on one aircraft. Marketing, pricing, and ticketing will also be shared, and these result in very impressive cost savings (about $150 million per airline).

As previously mentioned, American, Iberia and British Airways in the oneworld alliance and United, Lufthansa (and soon Continental) in the Star Alliance are working on similar deals. This means that airlines without an alliance affiliation – like Virgin Atlantic – might suffer as a result. And while this means that Air France and Delta are cooperating even more closely, they can’t actually merge – under US law, a foreign company can’t own more than 25% of a US airline, although this rule might end in the future.

Some slides from the Air France/Delta news conference in Paris on Wednesday:

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