Air France-KLM, Delta Air Lines and Virgin Atlantic to Form Joint Venture

This just in — Air France-KLM, Delta Air Lines and Virgin Atlantic have created a four-way joint venture. On top of this, Delta and China Eastern will each acquire a 10% stake in Air France-KLM.

To establish the joint venture, Air France-KLM will acquire Virgin Group’s 31% stake in Virgin Atlantic for £220 million, reducing the British-owned stake of one of the UK's most famous brands from 51% to 20%. Despite this, Virgin Atlantic will retain its independence as a British airline with a UK air operating certificate, and will continue to fly under the Virgin brand. Furthermore, Delta and China Eastern (who are already joint venture partners) will each acquire a 10% stake in Air France-KLM worth €751 million.

In a statement about the newly-announced agreement, Richard Branson said, "I’m delighted to say that we’ve agreed with Air France-KLM and Delta our collective intention to form a four way strategic joint venture, which will be extremely beneficial to our airline, our customers and the brand we all love so dearly. We’ve also agreed with our partners how important it is the Virgin Atlantic brand lives on as part of our arrangement." For Delta, this new agreement is an enhancement of its long-standing joint venture with Air France-KLM, which dates back to 2009, with the addition of Alitalia in 2010.

This joint venture will offer passengers more convenient flight schedules thanks to added frequencies, and the ability to earn and redeem miles across all carriers. This means that Virgin Atlantic Flying Club members will be able to earn and redeem when flying on Air France-KLM, which hasn't been possible before.

The benefits of the new venture also include co-location of facilities at key airport hubs to improve connectivity times for customers. It's still too early to know the specifics, but it's likely that there will be a shuffling of airlines in Atlanta (ATL), Paris (CDG) and London (LHR) to reflect the new relationship. For example, at LHR, we'll most likely see Air France-KLM move its operations to Terminal 3, which is already home to Delta and Virgin Atlantic.

Thanks to this new relationship, there will be more than 300 daily nonstop transatlantic flights among the four airlines connecting key markets for the airlines including Amsterdam (AMS), Atlanta (ATL), Boston (BOS), Cincinnati (CVG), Detroit (DTW), Los Angeles (LAX), London-Heathrow (LHR), Minneapolis-St Paul (MSP), New York-Kennedy (JFK), Paris-Charles de Gaulle (CDG), Salt Lake City (SLC) and Seattle (SEA).

Bottom Line

This is great news for passengers — four huge players in the industry are deepening their relationship to provide more flights, increased frequencies, and more ways to earn and redeem miles across all four airlines. Since Delta, Air France and KLM are members of the SkyTeam alliance,the ability to earn and redeem miles on each other's flights already exists. This means that Virgin Atlantic flyers will notice the biggest changes, as their tickets, miles and status currently have no connection whatsoever with Air France or KLM. Passengers will be pleased, too, when the airlines complete co-location at key hubs, as connections will be much smoother and it will give passengers greater access to the combined networks of the four airlines. Stay tuned to TPG for more coverage of this developing story.