Air France–KLM, Delta, Virgin Are One Step Closer to Joint Venture

The big four-way deal from last year is still on: Air France-KLM, Delta Airlines and Virgin Atlantic signed a new document Tuesday delineating the terms of their expanded trans-Atlantic joint venture. The three airlines hashed out further details on the logistics of the proposed partnership, and now the brief goes before regulators to ensure they receive the appropriate legal approvals.

Air France–KLM will acquire a 31% stake in Virgin Atlantic for $297 million, while the Virgin Group will retain a 20% stake and chairmanship of the Virgin brand. Finally, Delta will retain its 49% ownership stake, acquired in 2013.

The new joint venture will combine strengths from each airline's network of partners and resources to create a comprehensive route network for travelers crossing the Atlantic. The goal is to offer convenient flight schedules and competitive fares that make the Air France-KLM/Delta/Virgin Atlantic partnership a no-brainer for passengers looking for reciprocal frequent flyer benefits such as the ability to earn and redeem miles across all carriers. Per our assessment of the scenario last summer, it's likely that the partnership will involve shuffling airlines in Atlanta (ATL), Paris (CDG) and London (LHR) to reflect the new relationship, such as possibly seeing 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).

While we've covered the original news of the joint venture before, this announcement brings the experiment one step closer to fruition. We stand by our assessment from last July that 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. Because 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.

With additional reporting by Alex Macheras.

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