Air France And Delta Set Transatlantic Venture

October 17, 2007

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Air France-KLM and Delta Air Lines announced plans on Wednesday to team up on routes linking major US cities and London's Heathrow Airport in a challenge to rival British Airways.

The joint venture aims to take advantage of the Open Skies pact set to liberalize transatlantic rules next year, and will be implemented in April 2008.

It will first cover all transatlantic flights between the Air France and Delta hubs, as well as all flights operated by either carrier between London Heathrow and the US, they said. These flights will be sold by the non-operating carrier on a code-share basis.

Starting in 2010, "numerous" flights to all destinations between Europe, the Mediterranean and North America will be part of the joint venture, the airlines said in a statement.

"The revenue encompassed by the first phase of this joint venture is estimated at approximately USD$1.5 billion per year, and more than USD$8 billion per year for the second phase," they said.

Air France told investors on Monday it planned a new direct route from Heathrow to Los Angeles and would use Heathrow slots to serve nine US destinations under the Delta deal, according to analysts who attended the event, which was closed to media.

For decades, US access to Heathrow has been limited to two US and two UK airlines -- currently British Airways and Virgin Atlantic along with American and United.

Analysts said Air France KLM Chief Executive Jean-Cyril Spinetta told investors that the deal with Delta would add "several dozens of million euros" in profits in 2008.

The Delta venture is modeled in part on a 10 year old agreement between Northwest and KLM, the Dutch airline which is part of the Air France group.

Air France and Delta hope to extend cooperation to include Northwest Airlines and Continental Airlines once they win multi-party anti-trust immunity, analysts said.

The aim is to tap into large US domestic networks operated by the US carriers, and link these with Europe's busiest airport at Heathrow.

(Reuters)