Air France, Delta form joint venture for trans-Atlantic flights

<p>Air France-KLM and Delta Air Lines Inc. signed a joint venture 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.</p><p>The tie-up is to launch in April and is estimated to generate $1.5 billion a year in its first phase, the companies said in announcing the deal at Paris' Charles de Gaulle airport.</p><p>The deal will be a major challenge to competitors like British Airways jockeying to benefit from the open skies deal.</p><p>The venture will first apply to all non-stop 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.</p><p>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.</p><p>Atlanta-based Delta will benefit from three of Air France's landing slots at London's congested Heathrow airport. These routes will include a new London-Heathrow to Los Angeles route operated by Air France, two Heathrow-JFK flights operated by Delta and a Heathrow-Atlanta flight operated by Delta.</p><p>In addition, Delta will operate three new non-stop transatlantic routes: Paris-Orly to JFK, Lyon-JFK and Paris CDG to Salt Lake City.</p><p>Delta Air Lines CEO Richard Anderson said the venture would generate $8 billion in annual revenue when fully operating.</p><p>Anderson noted revenue estimates were preliminary but that the group 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."</p><p>"You're actually connecting two global networks to create the world's largest global network," Andersen said.</p><p>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.</p><p>The joint venture has an initial term through March 31, 2016 and will be renewable at three-year intervals thereafter.</p><p>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.</p><p>Collins Stewart said the deal is likely to be a catalyst for wider combinations, including BA and American and Germany's Deutsche Lufthansa AG, United Airlines of the U.S. and Britain-based BMI.</p><p>Air France-KLM shares were up 0.9 percent at $37.92 in Paris at midday.</p><p>The Franco-Dutch airline's CEO has said in recent weeks that the Open Skies agreement would allow Air France to offer flights out of Heathrow under its own flag, as well as new code-sharing agreements with Delta and KLM's partner airline Northwest Airlines Corp.</p><p>Spinetta also said Air-France KLM expects to start discussions with Alitalia SpA in the coming weeks. Air France KLM is one of the six investors which have been short-listed by the financially ailing Italian airline as possible buyers.</p><p>He said he had "no intention to directly operate flights out of Italy to the U.S." if Air-France KLM were to eventually take over Alitalia SpA.</p><p>Spinetta also said that Air France KLM is continuing to study a possible alliance with Spanish airline Iberia Lineas Aereas de Espana SA. Its board is to meet Oct. 25 to discuss future partnerships.</p><p>Air France and KLM merged three years ago, but both airlines are still being operated separately so as to retain landing slot privileges, notably at Heathrow where availability is extremely tight.</p>

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