Air France-KLM strengthens its ties with Delta, China Eastern and Virgin Atlantic

It was totally unexpected: the Air France-KLM group announced on Thursday July 27th important capital exchanges between Delta, China Easternand Virgin Atlantic. If the operation seems at first sight purely financial, the impacts will be considerable for travelers, and for the structure of the world air transport.

Delta and China Eastern participate in a major capital increase

Through a large capital increaseof the Air France-KLM group, Delta and China Eastern each take a 10% stake in the group. In addition to the cash injection that will enable the group to complete its product transformation on the ground and in the air, this financial participation will considerably strengthen the links between these airlines, which are already financially linked, as far as Delta, Air France and KLM are concerned, in the transatlantic Joint Venture.

The partnership with China Eastern, already very strong with many bilateral code-shares, will continue to strengthen, most of all from an operational perspective and at the pricing level, opening the way, timidly but surely, for a joint venture with the Chinese airlines of SkyTeam, which would be a first with China!

Air France-KLM takes a substantial stake in Virgin Atlantic

Thanks to the capital increase, Air France-KLM has acquired a31% stake in Virgin Atlantic from Virgin Group. With Delta already owning 49% of the shares, the group has full control of the airline created by Richard Bronson, whose product is one of the most innovative on transatlantic routes.

In addition to this investment,the integration of Virgin Atlantic into the existing joint venture will allow for the continued development of an already very profitable business.

What are the impacts for travelers?

Obviously, nothing has been announced yet, but this kind of synergy has a direct impacton the product offered to passengers in general.

A predictable exit of Alitalia from the Joint Venture

Virgin Atlantic’s entry into the transatlantic joint venture coincides with announcements by various potential buyers of Alitalia, such as Ryanair, that they want out of the existing joint venture with Delta and Air France-KLM. This means fewer connecting opportunities for passengers (surely compensated by those offered by Virgin Atlantic) and, ultimately, a probable exit of the Italian national airline from the SkyTeamalliance.

Virgin Atlantic’s entry into SkyTeam

With this kind of cross-shareholding,it is very likelythat Virgin Atlantic will join the SkyTeam alliance. What about Virgin America ? Why not, even if Delta is potentially competing with the small American airline on some routes.

What are the impacts? Of course, all benefits such as lounge access, status mileage and baggage allowance.

What’s next?

Anything is possible. But the most likely hypothesis, which I have been foreseeing for years, is the increasing share of Delta Airlines in the Air France-KLM group, eventually leading to a takeover.

And frankly, it would be one of thebest things that could happen to the group. Qatar Airways has taken a substantial stake in IAG. The group can therefore hardly criticize the so-called unfair competition from the Gulf airlines…

By staying out of it, and joining forces with its historical partner, the group has everything to gain. It remains to clear the social aspect… But Air France-KLM has overcome many other obstacles in the past!

Olivier Delestre-Levai
Olivier Delestre-Levai
Olivier has been into airline blogging since 2010. First a major contributor to the FlyerTalk forum, he created the FlyerPlan website in July 2012, and writes articles with a major echo among airline specialists. He now co-runs the TravelGuys blog with Bertrand, focusing on travel experience and loyalty programs.
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