Air France-KLM, Delta see protection in transatlantic venture

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SkyTeam members Air France-KLM and Delta Air Lines believe their new transatlantic joint venture will strengthen their competitive and financial positions, shielding them from the economic downturn.

The long-term cost- and revenue-sharing venture covers 200 daily transatlantic flights to over 400 destinations in Europe and North America, representing 50,000 daily seats or 25% of total transatlantic capacity, with estimated revenues of over $12 billion.

Speaking during a media briefing to mark the signing of the agreement in Paris today, Air France chief Pierre-Henri Gourgeon said the joint venture would be a major strength for SkyTeam against its rival alliances.

"By optimising the use of our pooled resources, this joint venture will help us weather the current economic situation and protect our product offering," he says.

Delta Air Lines chief Richard Anderson adds: "We will operate as a single business where we consensually develop our strategies, and share revenues and costs."

Following the merger of Delta and Northwest Airlines, the partners say the single transatlantic venture was "the next logical business strategy".

It extends to all flights between North America and Europe, Amsterdam and India, as well as between North America and Tahiti. A second tier to the agreement extends it to include services between North America and Africa, the Middle East and several Latin American countries.

Customers will benefit from the partnership through improved flight schedules, competitive fares and harmonised services, say the partners, while corporate clients will gain from a broader offering and more efficient account management.

Governance of the joint venture will be equally shared between the three carriers, but the partnership does not include any equity stake or the creation of a new subsidiary.

It will be led by an executive and management committee. The executive committee will comprise Gourgeon, Anderson and KLM chief Peter Hartman. The management committee will define the venture's strategy, with representatives from marketing, network, sales, alliances, finance and operations.

Operational roll-out of the agreement will be overseen by 10 working groups, responsible for implementing and managing the venture's network, revenue management, brand, product and other aspects.

The venture's network will be structured around six main hubs - Amsterdam, Atlanta, Detroit, Minneapolis, New York JFK and Paris Charles de Gaulle - and four subsidiary hubs: Cincinnati, Lyon, Memphis and Salt Lake City.

Carriers' brands will be combined in advertising and at all North American and European airports, and they will codeshare flights where possible. The deal is an 'evergreen' arrangement that can only be cancelled, with three years' notice, after an initial 10-year term.

Related blog: Airline Business - VIDEO: Interview with KLM chief executive Peter Hartman