Delta, Air France Unveil Transatlantic Joint Venture

Delta Air Lines and Air France today announced a transatlantic joint venture set to go into effect in two phases beginning in April and to be completed by 2010. Through the agreement, the carriers plan to share a common bottom line for transatlantic operations, align transatlantic corporate sales strategies and expand routes in tandem.

The deal gives Delta Air Lines access to three Air France slots at London Heathrow, through which Delta plans to launch daily Atlanta-Heathrow service and twice-daily New York JFK-Heathrow service in March. In addition to new Heathrow service, the first phase of the joint venture covers flights between Air France's Paris Charles de Gaulle, Paris Orly and Lyon hubs and Delta's Atlanta, Cincinnati, New York JFK and Salt Lake City hubs, representing combined annual revenues of $1.5 billion, the companies said.

By 2010, the joint venture will govern all flights across the Atlantic operated by the two carriers and all flights between Los Angeles and Tahiti, representing combined annual revenue of $8 billion, the carriers estimate. Delta and Air France said by next summer "many transatlantic flights operated by Air France and Delta between Europe and the U.S. will be sold on a codeshare basis."

"Together, we will be able to offer passengers more flight options and frequencies, better schedules, new opportunities to earn more miles to take advantage of an enlarged network with seamless booking," Delta CEO Richard Anderson said.

The carriers said the joint venture will not create a subsidiary, rather a steering committee with representatives from both carriers will manage the endeavor through nine working groups "responsible for coordinating day-to-day implementation of the joint venture agreement in the areas of network, revenue management, sales and distribution, products and services, frequent flyer program, operations, IT, finance and cargo."

Delta senior vice president for global sales and distribution Pam Elledge today said the working group responsible for corporate sales will implement a "sales code of conduct: the guiding principles in terms of alignment of sales programs and distribution programs that we have. Though we'll be two separate companies and two separate brands, the sales code of conduct aligns those two sales forces together in terms of the focus and customer benefits."

However, Delta and Air France executives today said the agreement—which needs no further regulatory approval—would not immediately impact corporate contracts or airfare distribution.

"Today, as we sit here, there's really no change with any of the processes with customers," said Delta's Elledge. "The customers will continue to have a seamless experience with Air France and Delta. In the future, we'll look at more options for the travel agencies and corporate customers. With the joint venture, there will be the potential for companies and agencies to have a more comprehensive program in place versus where we are today."

The Delta-Air France agreement calls to mind a similar joint venture operated by SkyTeam partners Northwest Airlines and KLM Royal Dutch Airlines, and also paves the way for an expanded four-way joint venture agreement between the four SkyTeam partners.

Air France, KLM, Delta, Northwest, Alitalia and CSA Czech Airlines are awaiting the U.S. Department of Transportation's approval of an antitrust request filed this summer. The request includes a proposed joint venture among Air France, Delta, KLM and Northwest that has sparked further European Commission investigation.

In a DOT filing last month, the carriers said the four-way plan "supersedes" the two separate joint ventures, and that the establishment of the Air France-Delta deal does not reduce "the parties' need, motivation, economic incentive, or desire to complete their negotiation and implementation of a four-way joint venture agreement." Instead, "the parties anticipate that both joint ventures will form the building blocks for final negotiation and implementation of the proposed four-way joint venture discussed in the joint application."