Air France-KLM, Delta joint venture to hot up competition on trans-Atlantic routes

Paris: Air France-KLM and Delta Air Lines Inc announced a joint venture on Wednesday that will allow them to share profits and up to an estimated $8 billion in annual revenue on trans-Atlantic routes. The move follows the new Open Skies agreement on airline service between the US and Europe.

To launch in April 2008, the venture will generate an estimated $1.5 billion a year in revenue in its first phase and $8 billion a year when fully operational, the partner companies announced in Paris.

Such a deal is likely to pose a major challenge to competitors such as British Airways, UAL Corp.'s United and AMR Corp.'s American Airlines as they begin to position themselves to benefit from the Open Skies deal. According to analysts, the move would very likely inspire more trans-Atlantic combinations amongst airlines.

Moving in phases, the venture will first become applicable on all non-stop flights between Air France's French hubs and Delta's Atlanta, New York-JFK, Cincinnati and Salt Lake City hubs. Together, these will represent 19 flights, carrying more than 4,500 seats per day.

From 2010, the venture will encompass all destinations between Europe, the Mediterranean and North America, as well as flights between Los Angeles and Tahiti.

Analysts pointed out that though the partnership would not impact air fares it would benefit passengers in terms of non-stop options. Others also said that the lucrative trans-Atlantic dollar would also ensure that passengers received superior service, which is a constant demand from passengers.

Delta was also set to benefit from three of Air France's landing slots at London's congested Heathrow airport. These routes will include a new Heathrow to Los Angeles route operated by Air France, two Heathrow-JFK flights operated by Delta and a Heathrow-Atlanta flight also operated by Delta.

In addition, Delta will operate three new non-stop trans-Atlantic routes: Paris-Orly to JFK, Lyon-JFK and Paris-Charles de Gaulle to Salt Lake City.

According to Delta officials, the combination was all set to create the world's largest global network.

Air France and KLM merged three years ago, but still operate separately in order to retain landing slot privileges at international destinations. This works to their advantage, particularly at Heathrow, where availability is extremely tight.