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Alitalia dropped from expanded Delta-Air France pact

Alitalia is out of the expanded joint venture between Delta Air Lines and its partners Air France, KLM and Virgin Atlantic Airways.

The Italian carrier was not included in an amended joint venture application filed by Air France-KLM, Delta and Virgin Atlantic with US authorities on 20 July, with the airlines citing its ongoing restructuring for the move.

"Although the parties hope to implement metal-neutral cooperation with Alitalia in the future, Alitalia is currently undergoing restructuring through the Italian bankruptcy process, and its future ownership structure is uncertain," the applicants say in the filing with the US Department of Transportation.

Alitalia has been part of the immunised Air France, KLM and Delta pact since 2010.

Air France-KLM, Delta and Virgin Atlantic announced plans to consolidate their separate joint venture agreements – between Air France, Delta and KLM, and Delta and Virgin Atlantic – into a single accord covering the transatlantic market in July 2017. At the time executives said that Alitalia would be included in the partnership, however none of the Italian carrier's management participated in media events and its hubs were left out of initial promotional material.

Air France, Delta, KLM and Virgin Atlantic operated just over a quarter of transatlantic capacity during the year ending in July, FlightGlobal schedules data shows. Including Alitalia boosted their share by less than one percentage point.

The partners claim that their new combined joint venture, which will allow them to jointly coordinate schedules, fares, marketing and other commercial aspects, will generate roughly $85 million in annual benefits to travellers, as well as allowing them to better compete with other immunised partnerships.

Delta and its partners point to their track record adding new routes and increasing transatlantic capacity under their separate joint ventures as proof that they will continue to do so under a consolidated agreement.

For example, Delta and Air France have recently added service between Indianapolis and Paris Charles de Gaulle, as well as increased capacity between Los Angeles and both Amsterdam and Paris. Delta and Virgin Atlantic have added new service between London Heathrow and Seattle, and Manchester and San Francisco, among other network changes.

American Airlines, British Airways, Iberia and Finnair's joint venture dominates the UK-USA market, something Delta and its partners claim they will better be able to counter by working together.

The applicants also claim that they could mount a more effective competitive response to long-haul low-cost carriers, like Norwegian and Wow, with a combined partnership.

Delta, Air France, KLM and Virgin Atlantic did not provide an expected timeline for approval. The partnership must also be approved by the relevant authorities in Europe and the UK.

Outgoing Virgin Atlantic chief executive Craig Kreeger said in March that he expects the expanded joint venture to secure all the necessary regulatory approvals by the spring of 2019.

Delta acquired a 49% stake in Virgin Atlantic in 2013, and launched a joint venture with the carrier in January 2014.

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