Delta Air Lines Inc., Air France and KLM signed a deal Wednesday to combine two separate joint venture agreements into one to create a more integrated transatlantic powerhouse that they said will generate $12 billion US in annual revenue.
The airlines said they will share costs and revenues, as well as co-ordinate branding at airports and global advertising.
Air France-KLM Group and Delta also will share governance of the joint venture. An executive committee consisting of the three CEOs and a management committee including representatives from the three carriers will work together on strategy.
The joint venture represents approximately 25 per cent of total transatlantic capacity.
The co-operation agreement between Europe's largest airline and the world's largest airline operator will mean the carriers will operate more than 200 daily flights and offer about 50,000 seats per day.
The joint venture covers all the airlines' flights between North America and Europe, between Amsterdam and India, and between North America and Tahiti, the companies said.
'Unprecedented' agreement
The joint venture will not lead to the creation of a subsidiary, the airlines said at a news conference in Paris that was broadcast on the internet.
No new routes were announced beyond what the two previous agreements provided for separately.
Delta chief executive Richard Anderson called the joint venture agreement "unprecedented."
Anderson said there will be seamless booking, single contracts of carriage, co-ordination through sales and distribution, and more access to frequent flier upgrades and other redemption opportunities.
KLM signed a joint venture agreement with Northwest Airlines in 1997, while Air France and Delta signed a joint venture agreement in 2007. Following Atlanta-based Delta's acquisition of Northwest in October 2008, the carriers decided to work on forming a single joint venture.
Alliances between U.S. and foreign carriers are not new. They allow the carriers to offer more options to passengers, while allowing the carriers to share revenues and costs.
Antitrust laws
There's a pending bid by American Airlines and British Airways to co-operate on transatlantic flights without fear of breaking antitrust laws. Regulators are looking at the issue.
American and BA have been thwarted twice before in seeking closer ties, but their prospects appear brighter this time because of changes in the airline industry over the past several years.
American and its partners in an alliance called oneworld argue that they should get antitrust immunity because two competing alliances already have it вЂ" Star (Lufthansa, United, and beginning this fall, Continental) and SkyTeam (Delta, Air France-KLM).
American also notes that the U.S. and Europe have signed an open-skies treaty, increasing competition at Heathrow, since its last failed effort to work more closely with BA.
The Delta-Air France-KLM joint venture is structured around six main hubs: Amsterdam, Atlanta, Detroit, Minneapolis, New York-JFK and Paris-CDG, together with Cincinnati; Lyon, France; Memphis, Tenn., and Salt Lake City.
