New joint venture will cover select transatlantic routes from 2008 and all transatlantic routes from 2010
Air France and Delta in mid-October signed a joint venture agreement covering transatlantic services that will be extended to KLM and Northwest if the four SkyTeam carriers receive antitrust immunity.
Air France and Delta will start sharing revenues and profits on select transatlantic routes in April 2008 and on all transatlantic routes in 2010. The arrangement is similar to the groundbreaking joint venture KLM and Northwest began in 1993. "We believe this is a tried and tested model," says Air France-KLM chief executive Jean-Cyril Spinetta.
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He adds Air France and Delta would be interested in creating a four-way tie-up with KLM and Northwest, but this is not possible without antitrust immunity. The four carriers re-applied in June for antitrust immunity from the US Department of Transportation, which rejected their last immunity request in 2005. Delta chief executive Richard Anderson, who is very familiar with the Northwest-KLM joint venture from his days at Northwest, is confident the application will be approved this time because with EU-US Open Skies, all the requirements are now met. "We expect we should be able to obtain approval," says Anderson.
Spinetta (pictured above left with Anderson) adds: "It is under review and we hope to have an answer by summer 2008. If we have antitrust immunity we'll start discussions between us to build a four-way venture."
Air France and Delta project their joint venture will generate about $1.5 billion in annual revenues during the first phase, which will cover flights from Delta's US hubs to Paris, Lyon and London Heathrow. More than $8 billion in annual revenues are projected for the second phase, when the agreement will be extended to include all transatlantic flights. Several new routes will be launched as part of the venture, including Heathrow-Los Angeles.
Anderson estimates the joint venture will result in $120-200 million in additional pre-tax earnings from 2011, and will give the two carriers an advantage no competitors can replicate. "We're linking the two most powerful airlines across the Atlantic," he says. "We're engaging in a commercial opportunity where one plus one equals five."
Source: Airline Business
