Delta, Air France-KLM Form Transatlantic Joint Venture

By The Associated Press

posted: 17 October 2007 12:43 pm ET

: Delta Air Lines' new joint venture on transatlantic services with the Air France-KLM group will see the U.S. carrier launching a new route between Paris Charles de Gaulle Airport and its hub at Salt Lake City (shown here), as well as new routes from Paris Orly Airport and Lyon to New York JFK. Credit: Delta Air Lines
: The Air France-KLM group's new joint venture on transatlantic routes with SkyTeam Alliance partner Delta Air Lines, created to take advantage of the new U.S.-European Union 'Open Skies' air services agreement effective from next March 30, will add new routes, new flights and thousands of seats to the three airlines' services across the Atlantic. Credit: Capital Photo for KLM
: Air France-KLM and Delta Air Lines, the partners in a new transatlantic-service joint venture designed to take advantage of the new U.S.-European Union 'Open Skies' air service agreement that becomes effective on March 30, 2008, expect the new venture to create an additional $1.5 billion of revenues in total during its first year. The partners expect that when the new joint venture is fully up and running, it will create as much as $8 billion of additional sales for them. Credit: Air France/Ph Delafosse

PARIS (AP) -- Air France-KLM and Delta Air Lines Inc. signed a joint venture agreement Wednesday allowing them to share revenue and profits on trans-Atlantic routes, taking advantage of the new Open Skies agreement between the United States and Europe.

The tie-up, to launch in April, is estimated to generate US$1.5 billion a year in its first phase, the companies said in announcing the deal at Charles de Gaulle airport. Delta CEO Richard Anderson said it would generate US$8 billion in annual revenue when fully operating.

Such a deal will be a major challenge to competitors like British Airways as airlines jockey to benefit from the Open Skies deal, and some analysts said it could spur more trans-Atlantic combinations.

The venture will first apply to all nonstop flights between Air France's French hubs and Delta's Atlanta, New York-JFK, Cincinnati and Salt Lake City hubs, representing 19 flights and more than 4,500 seats per day.

Starting in 2010, numerous flights to all destinations between Europe, the Mediterranean and North America will be part of the joint venture, they added, as well as flights between Los Angeles and Tahiti.

Delta will benefit from three of Air France's landing slots at London's congested Heathrow airport. These routes will include a new Heathrow to Los Angeles route operated by Air France, two Heathrow-JFK flights operated by Delta and a Heathrow-Atlanta flight operated by Delta.

In addition, Delta will operate three new nonstop trans-Atlantic routes: Paris-Orly to JFK, Lyon-JFK and Paris CDG to Salt Lake City.

Anderson noted revenue estimates were preliminary but said the company was optimistic because it was able "to take its significant network assets and the significant distribution that Air France enjoys as one of the greatest airline brands in the world and couple it with a massive distribution system, a massive frequent flyer program and an extended network of Delta."

"You're actually connecting two global networks to create the world's largest global network," Anderson said.

Jean-Cyril Spinetta, chairman and chief executive of the Air France-KLM Group, said, "We are hoping for several tens of millions of additional profitability" from the venture.

Air France and KLM merged three years ago, but are still being operated separately so as to retain landing slot privileges, notably at Heathrow where availability is extremely tight.

The deal will challenge competitors like British Airways PLC, which has twice unsuccessfully attempted to combine with AMR Corp.'s American Airlines on trans-Atlantic routes.

Collins Stewart analysts said the deal is likely to be a catalyst for wider combinations, including BA and American and Germany's Deutsche Lufthansa AG, UAL Corp.'s United Airlines of the U.S. and Britain-based BMI.

Air France-KLM shares rose 0.9 percent to euro26.80 (US$37.92) in Paris.

Spinetta also said Air France-KLM expects to start discussions with Alitalia SpA in the coming weeks. The airline is one of the six investors short-listed by the financially ailing Italian carrier as possible buyers.

He also said Air France-KLM is still studying a possible alliance with Spanish airline Iberia Lineas Aereas de Espana SA. Its board is to meet Oct. 25 to discuss partnerships.