Approved: Delta, Air France-KLM, And Virgin Atlantic Joint Venture

Filed Under: Air France/KLM, Delta

In August the US Department of Transportation tentatively approved this joint venture, and that has now been finalized, meaning that we should see this launch shortly, including reciprocal frequent flyer benefits.

Before we get into the exact details, let’s cover some of the basics.

What Is A Joint Venture?

A joint venture is the highest level of cooperation you can have between two airlines.

When airlines form a joint venture they coordinate pricing and schedules in a given market, and have a revenue sharing agreement. Exactly how that revenue sharing agreement works depends on the specific situation, but the idea is that two airlines are essentially acting as one under a joint venture.

Note that airlines form joint ventures between specific regions, which is why this is different than an outright merger.

From the perspective of a consumer, a joint venture is both good and bad:

  • The good news is that typically it gives you the most flight options in terms of schedules, since the airlines are operating as one; airlines also often try to make the experience as consistent across brands as possible
  • The downside is that it’s like a competitor being eliminated in the market, so it could lead to higher fares as it reduces competition

Delta’s Current Transatlantic Joint Ventures

Delta is in an interesting situation because up until now they’ve had two separate transatlantic joint ventures, which basically cover the same regions:

  • Delta and Virgin Atlantic have a transatlantic joint venture
  • Delta is part of the SkyTeam transatlantic joint venture, which also includes Air France-KLM and Alitalia

Those are two separate joint ventures, so that means that while Delta works closely with all of those airlines, there’s no cooperation as of now between Virgin Atlantic and the other transatlantic SkyTeam airlines.

What’s also interesting is the equity investments involved here:

  • Delta owns a 49% stake in Virgin Atlantic, and a couple of years ago it was announced that Air France-KLM would acquire a 31% stake in Virgin Atlantic
  • Delta owns an 8.8% stake in Air France-KLM

In this case Delta doesn’t just have a joint venture, but they also have an equity stake.

The New Transatlantic Mega-Joint Venture

A while back, a request was made to form a new transatlantic joint venture. Essentially the request was for a single transatlantic joint venture between Delta, Air France, KLM, and Virgin Atlantic. That means that rather than two separate joint ventures, Delta would have a single joint transatlantic venture.

In August the US Department of Transportation tentatively approved the new joint venture, and on Friday the DOT finalized approval of the new joint venture, meaning that they’ve now cleared all regulatory hurdles.

This joint venture being approved also means that Alitalia is being cut out of the transatlantic joint venture. It’s my understanding that the transatlantic market is one of the few in which Alitalia makes money, so this will be a huge loss for them, as they won’t be part of this lucrative joint venture.

What Does This Mean For Cooperation Between Airlines?

Aside from pricing, there are two big implications to this new joint venture for passengers.

First of all, when booking paid tickets you should now be able to fly Virgin Atlantic in one direction and Air France in another direction, for example. That’s potentially kind of cool, especially when there are discounted business class fares and you want to mix things up.

Beyond that, we should expect cooperation between Air France-KLM Flying Blue and Virgin Atlantic Flying Club. While Delta already partners with Air France-KLM and Virgin Atlantic, this is the first time we’ll see cooperation between Flying Blue and Flying Club.

So you should be able to earn and redeem Virgin Atlantic miles on Air France-KLM soon, and vice versa. We don’t know an exact timeline for that yet, but I would guess it will happen within weeks.

Bottom Line

Usually I’m opposed to joint ventures on principle because they’re the equivalent of eliminating a competitor. In this case though two joint ventures are being consolidated into one.

There will definitely be some positive aspects to this, like being able to earn and redeem Virgin Atlantic miles on Air France-KLM and vice versa. But I’m also worried about the impact this will have on transatlantic revenue pricing.

What do you make of the new SkyTeam & Virgin Atlantic transatlantic joint venture?

Comments
  1. How are costs shared with a joint venture? I get they share revenue but the airline actually flying to spending a lot on fuel, employees, etc.

  2. It’ll be interesting to see what the award prices are for flying on AF/KL metal using VS miles. We already know VS miles are great for flying on DL, so hopefully that trend continues with AF/KL.

  3. ive found for getting best deal on airmiles is to be a skymiles member, as you get miles for all partner airlines, plus better upgrades on delta, The bad news is flying from UK with Virgin, not much chance of upgrade, unless global upgrades available , Diamond member of corse for these, plus no club visits, unless, gold virgin member,I think it will be very good, but i,m sure its already in place, so unless , smething extra is happening, won,t make much difference??. i,m flying UK, to France, CDG, on to SEA, to KONA, so 2 AF flights, one delta, Return, HNL /LAX Delta, then, KLM,for last two legs, I will get delta sky miles for all legs, Iask Delta , as well as their locator, the AF/KLM Locator, to book seats , etc for their legs, so i would think, it will all be under 1locator.

  4. @Steven is correct. The DL-AF-KL-VS JV is based on sharing profits, not revenues across the carriers. This is unlike the UA-LH-AC-LX-OS JV which is a revenue-sharing one.

    Also, if the pending AZ reorganization deal goes through including a stake by DL in AZ, you can bet they will apply for AZ to be included in the JV again.

  5. What will this mean for common shared destinations beyond Europe? An easy example would be JNB – will this JV allow an outbound on VS and inbound on AF/KL?

  6. I think DL is purposely leaving Alitalia out of the transatlantic JV as a way to pressure the Italian government to give them whatever they requested as part of the negotiations to acquire a stake at the Italian carrier

  7. Virgin is not a SkyTeam member so any Delta SkyMiles members will not earn points if they book via AF/KLM and fly on Virgin. Learned this the hard way and Delta Customer Service could care less!

  8. I am with Eskimo on this one—wishing we’d see a standardization of elite benefits for partner airlines within the block. I’m a VA Plat and so get benefits on DL, VS, and AZ, but bugger all on AF and KL. I get that this is largely VA’s problem, but I would love to see these new post-alliance blocs taking steps to provide partner consistency.

  9. @john it’s a transatlantic joint venture USA Canada and Mexico, so would exclude the Caribbean ( apart from Puerto Rico and US Virgin Islands)
    Although Air France klm delta own 80% of virgin it excludes South Africa , Hong Kong etc

  10. What earning benefits will AF/KL Flying Blue members get with VS flights? Earn FB Miles and XP? Since VS is not part of SkyTeam then SkyTeam Elite Plus and Elite status alone will not be applicable (i.e. SkyPriority) for lounge access, priority check-in/boarding/baggage reclaim.

  11. Delta better take the lead on this because KLM is useless. I am in Europe right now and had tickets booked on separate confirmation numbers flying Delta from the US to Europe and back and KLM intra Europe flights. Again, separate tickets. When checking in the US to Europe Delta easily linked both tickets and bags went all the way to final destination which were KLM flights. Now on the way back KLM was a disaster. They only checked the bags for my KLM flight to Amsterdam and made me get out of security, passport control in AMS to get the bags on baggage claim and recheck on Delta. What is the SkyTeam relationship for? Also, I was denied into their lounge because they did not recognize my Delta360 status. They told me they never heard of that. What a stupid airline.

  12. This JV is answer to the Big 3 of Middle East, EK, EY and QR. And the biggest loser is going to be QR, Since they own Alitalia and Air Italy. However, There would have to be significant changes in the operational model and revenue modelling for this to succeed.
    The flight numbers are gonna get real confusing

  13. @Santastico

    Which European airport was that where you were denied check thru privilege? Same one as where you’re denied into KLM lounge? I suspect it’s just rogue/lazy check in agent. My experience with KLM is usually good.

  14. @Santastico Because you had a negative experience with bagage and lounge acces you dont think KLM is capable of handling a Joint Venture? Thats a bit harsh.
    First of all from which airport did you fly to Amsterdam and then back to the US? Because normally you can always directly check in your luggage to the destination. But not when you are flying from an airport that doesnt have the specific security status for the US! So then its not KLM who doesnt want to check your luggage directly to the destination, but they are not allowed to. And thats all due to the high security levels of the US. Dont blame KLM.
    I think KLM is more than capable. If you see their results and how they do business then this would defenitely be the partner to choose!

  15. Im really looking forward to earn Flying Blue miles & XP on Virgin Atlantic direct without booking as an Delta code share.

  16. @Vince @Ron: I was denied access to KLM Crown lounge at Amsterdam Schiphol airport when I presented my Delta360 card. They said they never heard of that status level. I did not bother to argue with them but later asked Delta on Twitter and Delta said Delta360 is not a status but a recognition from Delta for high value customers. Well, problem is that they sent me a Delta360 card with my Skymiles number on it to use in 2019 so that is the card I have to present at the KLM lounge.

    As for the baggage handling, on the way into Europe I flew MSP to AMS on Delta and then AMS to BCN on KLM on separate tickets. Delta agent at MSP said although I had separate tickets they were both linked “behind the scenes” on the SkyTeam system. She was able to print both boarding passes and bags had BCN in the tags as final destination. On the way back to the US, I had a MAD to AMS on KLM and AMS to MSP on Delta. In Madrid the KLM agent said he could only check bags to AMS and I had to recheck them in AMS to MSP. Also, to make things more interesting I was flying with my family of four and my wife and two kids have no SkyTeam status. We were flying KLM intra Europe coach but Delta One on the transatlantic piece. KLM charged the bags from Madrid to Amsterdam. Again, not sure where the problem is but Delta handled it beautifully in the US and KLM was clueless in Europe.

  17. There’s your likely answer – separate tickets.

    Just because DL checked the bags through does not mean KL has to on the return and yes that includes charging you any baggage fees appropriate to the ticket you bought for their flights.

  18. @ChrisC: Did you miss the part where Delta said the tickets were linked in the SkyTeam system? According to Delta the same thing they saw at MSP when I checked in KLM would see in Madrid. My bags went straight to BCN and I did not pay baggage fees for the KLM part. All I am trying to say is that JV or not the SkyTeam system does not work the same for all airlines that are part of it.

  19. @Santastico

    Assuming 1) you book the intra Europe KLM tickets under one PNR 2) you put in your (Medallion ?) Elite SkyMiles number 3) you did NOT buy “Light” / Basic Economy tickets that don’t have any checked luggage allowance, the part that confuses me is why the KLM agent at MAD even attempted to charge you to check your luggages? As a SkyTeam Elite member you should get an EXTRA checked luggage allowance, definitely not being charged to check luggages. As for the lounge access in AMS, you were flying DeltaOne back to the US therefore you should have lounge access at any rate irrespective of elite status. Super strange why they denied entry to a SkyTeam business class passengers.

  20. Why don’t you VS directly join Skyteam then.
    VS is all about Trans-Atlantic and a bit of Europe-Asia
    I guess the only reason of not joining Skyteam for VS is Richard Branson saying no.

  21. Prices will go up I have seen prices in economy at $3000 in summer with planes 35% empty. To europe

  22. @EL Richard Branson has nothing to do with virgin Atlantic. They are 80% owned by Air France klm and delta
    He’s too busy telling people how “ stuff” doesn’t bring happiness. With a net worth of $4 billion mortgages rent bills etc don’t matter. He’s an idiot

  23. Ultimately this will eliminate Alitalia and more than likely and end to them thus eliminating competition and bad for the public interest. Maybe they should be included in the joint venture.

  24. I hope the ME3 floods the US with new routes and 5th freedom flights following this announcement!

  25. @ Scott. Air France and KLM have a partnership with Etihad It’s pretty unlikely they would flood the US. emirates cut 50 % of flights to the west coast Qatar only flies to LA and Etihad also cut services.

  26. @Ron/Santastico: assuming you hold also Diamond status with DL, your SkyMiles number should have been sufficient for lounge access and the bag. On KL and AF, even the “Light” or (AF) “Mini” fares come with a bag for ST E+ (contrary to LH where even HON doesn’t get a bag with a lite fare). Buy them all the time intra-EU. Very elite-friendly policy. So the PNR shouldn’t even have mattered.
    I’m a lowly Gold and thus don’t have a card to show, and I never had any problem with that. In fact, both KL and AF will sometimes even check more than one bag on light fares proactively (and no, flight not full) even with me pointing out that this is above allowance. In CDG last time, I just got a shrug and the agent said “but you’re gold, so that’s okay” 😉

    The only time something similar happened was in VIE when the agent (sitting under a DL/AF/KL sign) wanted to collect bag fees and claimed she doesn’t know the airline (DL). Quick call to supervisor, who was then rather apologetic, solved that one, and it had to do with my SkyMiles number not being correctly put in the system.

  27. @Nightliner,

    Thanks for sharing that AF/KL lets ANY SkyTeam elite member check luggages for free even on their basic economy fares.

  28. If I’m flying Alitalia from Chicago to Rome in late September (booked thru Jordan:) should I be concerned? Have to catch a cruise there, so can’t afford a last minute cancellation.

  29. What about the employees? A gain on profit for the airlines but a reduction in overlapping routes thus loss of profit for the crews? Who’s metal will fly the overlapping routes? As I have said before, Delta is planning on becoming a domestic carrier. They don’t care if employees lose their lucrative routes ($$).

  30. Currently Delta flies several flights a day from New York to London except that it doesn’t. Only two of them are not Virgin flights. Why is this bad? After all, flying with Virgin is a great experience. It’s bad when you have used any sort of frequent flier benefit with Delta to get to First Class (e.g. a global upgrade, an upgrade award or an award ticket) and want to switch to an earlier flight that is operated by Virgin. You can’t do it. There may be seats available but neither Virgin nor Delta staff have the ability to make that switch as much as they want to. in my case, I was on a first class award ticket and there was room in Upper Class but because there was no award inventory for Delta customers, I could not make the switch. For some reason they did have the inventory to switch me to a coach seat.

    In addition, trying to get a global upgrade honored on a Virgin flight is almost impossible. The only time I was able to do it, it was actually done by mistake. I didn’t realize that until I was on my way to the airport and noticed that I was booked in First Class on Delta but in Coach on Virgin. It was only a miracle and a lot of hard work behind the scenes by an amazing Virgin agent that allowed me to actually fly in Upper Class using that Global Upgrade.

    So I will be very happy with this venture if it makes this so-called seamless partnership a REAL seamless partnership.

  31. Santastico, You are talking about inconvenience; well in my case, they (KLM) wouldn’t even care that I have a confirmed ticket (by Delta) and connecting Delta flights when they bumped me off from Venice -> AMS leg. Had to reschedule my AMS->SEA and SEA->PDX Delta legs to fly on the next KLM flight.

  32. Interested to see what this does with transferrable points currencies… Amex is the only one with transfers to all the JV partners…

  33. RE: Lucky’s comment on flying Virgin Atlantic one way and Air France on return – this is not new. They had interline agreements in place, so you could have constructed your trip on one PNR that way. The biggest difference is now you can construct fares using roundtrip fares instead of 2 one-ways, which would usually bring down the price.

    @Santastico – KLM was correct in charging baggage charge, since the tickets were purchased on two PNRs. The “linkage” that the DL employee referenced was for operational reasons, and not for benefit of the passenger. Also, it’s weird that the KL lounge attendant denied access, since being in Delta One alone would allow access, regardless of your status.

  34. I don’t understand any of this stuff. I just tried booking my first ever Delta award flight this past weekend for next summer. I saw two flights on Delta airplanes, both available with miles. I look for those flights on Air France and Virgin Atlantic, and can’t find them for award. I can’t even find the flights for cash on Virgin Atlantic. And I’m changing the website so I’m on European versions and not US versions. I even chatted with a Virgin Atlantic rep and they couldn’t find the flights.

    How does this make sense and how is this customer friendly? I was hoping to transfer Chase points to Virgin Atlantic but had to transfer Amex points to Delta.

  35. @Jay what route were you lookng at?

    The joint venture hasn’t actually been implemented yet so it’s possible your route isn’t available to the partners even though it is on Delta.

  36. JFK-LIS next summer. I expected at least Virgin Atlantic to show the award seats, given the large equity stake Delta holds. I guess they’re releasing it so Delta flyers have a first crack for a while at booking the award seats before partners see the inventory. That’s the only thing that kind of makes sense to me.

  37. @santastico – you said your transatlantic flights were booked on Delta One, so you should have been admitted to the KLM lounge just on your ticket. Why didn’t you press that and not your airline status?

  38. And we’re all comfortable assuming Brexit, even if it’s a “hard Brexit”, has no impact whatsoever on any of this, yes? 😉

  39. This is very bad news for those of us hub tied in Atlanta. ALL transatlantic flights from ATL with the exception of a single BA flight to London and a single LH flight to Frankfurt are operated by DL, VS, AF or KLM. This means legal price gouging.

    Would somebody (@Ben) care to do a price analysis for flights from ATL to Europe compared to hubs where there is competition eg JFK, BOS, LAX, ORD or IAD? I’d be willing to bet that flights from Atlanta will be around 60% more expensive.

  40. @Paul,

    Ah, yes, nothing beats having an impenetrable fortress (aka monopoly, maybe duopoly) hub to allow for price gouging – er “convenience of nonstops to destinations that otherwise would not be possible without benefit of connecting traffic to subsidize/make that service sustainable.”

    But hey, lower fare, 1-stop options are always possible for Atlantans via JFK, Boston or CLT & IAD for select destinations! 😉

    Ain’t competition killing, price fixing/gouging, inventory & capacity coordinating/setting anti-trust immunized joint venture alliances great?!?!

    Ha!

    I bet most businesses in every industry wish they had a free pass on collusion to fix prices, set inventories & corner the market the way airlines now do! 😉

    Maybe this was not foreseen when the concept of anti-trust immunized alliances were first introduced by Northwest & KLM Royal Dutch Airlines in the early 1990s as part of an effort to promote the introduction of “Open Skies” treaties as a replacement for the antiquated bilateral treaty era dating back to the Chicago Convention.

    But yowza! With just three major airline alliances gaining a stranglehold over many of world’s most lucrative routes – for example, the impenetrable duopoly BA/AA & DL/VS have between LHR – JFK, which in the past had no less than four major competitors (AA, BA, UA/later DL & VS) each offering a slew of nonstops (except perhaps Delta, which lacked slots at LHR but could’ve purchased some as legacy CO did to offer a competitive schedule after LHR was opened up to more than just 2 USA-based airlines) plus “5th Freedom” options via AI, KU & even LY, and all of which made for a far more competitive market than now exists, the folly of these anti-trust immunized alliances is sure becoming clear in terms of fewer choices for flyers/consumers. 🙁

  41. Just a couple notes in response to comments above.

    Delta is the 5th largest longhaul international airline in the world based on seat miles over the past 12 months.
    Delta is the largest carrier across the Atlantic and second largest across the Pacific.

    Delta is also adding more capacity to its transatlantic network than either AA or UA next summer, according to current published schedules.

    AZ’s future depends on its employees being willing to do the restructuring the company has long needed and the employees have resisted. OTOH, the Italian government has managed to justify one cash injection after another.

    DL’s joint ventures do not include sub-Saharan Africa if I am correct.

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