Transatlantic Joint Venture

Mar 21, 2018 | Air France / KLM, Alitalia, Joint Ventures, Virgin Atlantic

DELTA              AIR FRANCE/KLM               ALITALIA

Every joint venture, code share, and ownership stake is unique. Learn more about what makes this relationship different from others. This page reviews the fundamentals surrounding the transatlantic JV, including route structure and other important facts. In addition, this page discusses the timeline involved in this agreement, highlighting various milestones.

TIMELINE OF TRANSATLANTIC JV

  • Northwest and KLM start first ever joint venture
  • Delta and Air France start a joint venture (prior to DAL/NWA merger)
  • Delta and Air France KLM start the current Transatlantic Joint Venture (after mergers on both sides) with a Production balance of 51.7% Delta, 48.3% Air France KLM with an buffer of 1.75% for the first two years, then 1.5%
  • Alitalia joined the Delta & AF/KLM joint venture The production balance is renegotiated in MOU14 to 50% Delta 50% Air France KLM Alitalia with a 1.5% buffer
  • ALPA files grievance for Delta’s failure to fly the minimum share, Delta settles with ALPA for $30M
  • Contract 2015 (TA2) lowers the minimum share of flying from 48.5% to 46.5%

WHAT FLYING IS COVERED BY THE JV?

  • Flights between North America and Europe
  • Flights between North America and French Polynesia
    • Air France operates flights from LAX to French Polynesia
  • Air France flights from the US to the Caribbean DO NOT count as part of the this JV
  • Flights between AMS and India used to be a part of this measurement, but ended after Delta stopped flying those routes
  • Measured in Equivalent Available Seat Kilometers (EASKs)
    • Measurement of capacity adjusted for an aircraft’s seat density and cargo capacity
    • Example: If Air France flies an A380 from France to the US it would register more EASKs than a 757 on the same route since the A380 has more seats and ability to carry more cargo. It would take almost 5 757 transatlantic flights to match one A380 transatlantic flight.
  • Delta can fly any type of aircraft, narrowbody or widebody, in this JV

PWA REQUIREMENTS FOR DELTA’s FLYING SHARE

  • Currently, the PWA mandates that Delta aircraft can fly no less than 46.5% of the EASKs
  • If Delta flies less than 48.5% of the EASKs, Delta aircraft must fly a total of 650,000 block hours consisting of international widebody block hours and 757 transatlantic block hours

HISTORY OF THE TRANSATLANTIC PRODUCTION BALANCE

  • LOA #16, signed July 15, 2009, Delta baseline EASK allocation was 51.7% to AF/KLM flying 48.3%
    • Delta’s 51.7% of the EASKs had a 1.75% buffer through 31 March 2012, and a 1.5% buffer afterward
  • MOU #14, signed July 5, 2010, Alitalia was added
    • Delta’s share of the EASKs was 50%, with a 1.5% buffer
  • April 2015 ALPA filed a grievance requesting expedited arbitration after Delta flew less than the contractual minimum of 48.5% of the EASKs
    • ALPA settled for $30 Million
    • The PWA was changed to allow Delta to fly no less than 46.5% of the EASKs

BLUE SKIES CHANGES TO THE TRANSATLANTIC JV

  • Alitalia is removed from the JV, Virgin Atlantic is added
    • The re-inclusion of Alitalia as an “associate” is a possibility
    • Delta will have a 10% ownership in AF/KLM
    • China Eastern (not part of this JV) will have a 10% ownership stake in AF/KLM
    • AF/KLM will take a 31% ownership stake in Virgin Atlantic
    • Delta will retain its 49% ownership stake in Virgin Atlantic
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