Air France-KLM, Virgin Atlantic, and Delta have a joint venture in place that allows them to operate, almost, like one airline working together to sell tickets. As part of this agreement, Air France-KLM has finally acquired the 31% stake in Virgin Atlantic they were seeking.
The deal cost Air France-KLM £220 million for their 31% share. Delta owns a 49% share which they bought in 2012. Singapore Airlines sold their 49% share in Virgin Atlantic to Delta for $360 million. The Virgin Group controls the remaining 20% stake in Virgin Atlantic
The transatlantic market has some of the most competitive airline routes. Many airlines have had disputes regarding transatlantic routes and Delta has been at the forefront of attempting to stifle the growth of Middle Eastern carriers on the transatlantic market.
As Delta works to implement their joint venture, they no doubt have in mind a way to reduce competition and increase profits. Joint ventures are also becoming more common. Delta Airlines recently implemented a joint venture with Korean Air which saw them become closer partners in flight schedules, routes, and frequent flier benefits. In addition, Delta is looking to capitalize on relationships with neighbors in Canada and Mexico. Aeromexico and Delta have a joint venture in place and Delta is working on their joint venture with WestJet
Joint Ventures are meant to increase cooperation between carriers. With these joint ventures, new routes come into play and airlines co-locate to facilitate easier connections. Some airlines find joint ventures to be more beneficial than joining an alliance since the costs are lower.
This news comes as Delta looks to take a significant stake in floundering Alitalia. Alitalia, a Skyteam member, was part of the original transatlantic joint venture Delta, Air France, and KLM had. Should Delta win the competition for Alitalia, there is no doubt that Alitalia will have a significant role in the transatlantic joint venture.
The closer cooperation between Air France-KLM, Virgin Atlantic, and Delta makes sense as Virgin seeks to acquire Flybe. Should Virgin Atlantic successfully acquire Flybe, their fleet would grow significantly and they would be able to capture a much larger share of passengers looking to get from Britain to the Americas or Asia.
For struggling Alitalia, the deal could help them remain afloat as low-cost carriers continue to encroach on the Italian market. With management at Delta and closer cooperation with intra-European tourists, they could make a comeback to profitability and remain flying.
Ultimately, this is another step as Air France-KLM, Virgin Atlantic, and Delta seek to protect their share of the transatlantic market.
The transatlantic market is fierce. American Airlines, British Airways, Finnair, and Iberia have a transatlantic joint venture in place. Not to be left out, United has a joint venture with Lufthansa, Austrian, Swiss, Brussels Airlines, and Air Canada.
For airlines, this is a new strategy to help them maintain profitability on coveted routes. The transatlantic market is a busy one filled with leisure, aviation geek, and business travelers. Delta, Air France-KLM, Alitalia, and Virgin Atlantic are looking to retain a strong foothold in the market.
What do you think? Are joint ventures good for passengers? Let us know in the comments below!