Delta spending $437M for a piece of Air France

2:33 p.m Thursday, July 27, 2017 Business
A Delta jet at Hartsfield-Jackson Atlanta International Airport. Delta is buying a 10 percent stake in European partner Air France-KLM. (AP Photo/David Goldman, File)

Delta Air Lines is acquiring a 10 percent stake in Air France, part of a round of cross-border investments among the airline’s international partners.

Atlanta-based Delta will buy the stake, worth about $437 million, in Air France-KLM, and it will gain a seat on the board.

Air France will buy a 31 percent stake in Virgin Atlantic from Virgin Group, while another Delta partner, China Eastern, is also acquiring a 10 percent stake in Air France-KLM.

Executives said the financial ties should help the partners offer better joint services. Customers will be able to earn and redeem miles across all carriers and be able to make easier connections, according to Delta, and premium customers will get access to airline partner lounges.

“A dynamic global landscape means it’s more important than ever for Delta to deepen ties with our global partners to provide opportunities for mutual growth,” Delta CEO Ed Bastian said in a written statement.

The airlines said the deals are aimed at creating “a single global joint-venture” between Air France-KLM, Delta and Virgin Atlantic, and to strengthen the partnership with China Eastern.

The deals are subject to shareholder approval and U.S. and European regulatory approval, including antitrust immunity clearance to allow the airlines to share costs and revenues and coordinate schedules on flights covered by the joint venture. Delta’s president of international, Steve Sear, said plans are to submit documents for approval to authorities this year.

Delta already has a trans-Atlantic joint venture with Air France-KLM and Alitalia, which are also part of the SkyTeam airline alliance. Delta also already owns 49 percent of Virgin Atlantic and 3.5 percent of China Eastern.

Airlines are limited on cross-border acquisitions, but Delta and other carriers are gaining some of the benefits of mergers through joint ventures with foreign carriers and equity stakes in partner carriers.

The mish-mash of evolving partnerships can at times be confusing for passengers. Airlines are targeting closer collaboration that makes it easier for passengers to connect between carriers around the world — while gaining an edge in the competition for global travelers.

Virgin Group founder Richard Branson in an open letter to Virgin Atlantic employees wrote: “One of the best moves we made nearly five years ago was tying up with Delta Air Lines, to create a joint venture across the Atlantic,” as a “competitive alternative” to British Airways-American Airlines.

“Delta has helped us considerably with feed from America, but because we don’t have more slots at [London] Heathrow or Gatwick we’re unable to enjoy feed from Europe or provide extra onward journeys for those customers we are now carrying to London,” wrote Branson, who will remain the largest individual shareholder in Virgin Atlantic. “To address this we’ve been in discussions with Delta’s partners in Europe, Air France and KLM, to give us that network and connections.”

Jessie Char, 30, had an unwelcome experience on her flight. She sat by empty seats... Then this. Gets worse. People were horrified.
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