In just a few days, Air France-KLM has taken a major step forward. Just launched its new airline JoonWith the prospect of a new offensive on previously loss-making long-haul routes, the Franco-Dutch airline group is raising the level of its strategic alliances by forging capital links with Delta Air Lines and China Eastern. Already partners of Air France-KLM through joint ventures on the Europe-North America and Europe-China routes, these two airlines are to acquire 10% of Air France-KLM capital 751 million reserved capital increase. "In an ultra-competitive sector, it's important to be on the offensive. At the time of the announcement of the Trust Together our desire to strengthen our alliances, and we have taken a considerable step in this direction"Air France-KLM's CEO Jean-Marc Janaillac explained when announcing the Group's half-year results, which showed a clear improvement in the Group's results, with passenger traffic up by 6.6 % over the first six months of the year.
This sum of 751 million euros will enable the Franco-Dutch group to refine its balance sheet and reduce its debt, but above all to finance the acquisition of 39% of Virgin Atlantic shares for an amount close to 250 million euros. The airline's main shareholder since 2012 has been none other than Delta, with whom it has built up a joint venture on transatlantic routes alongside the joint venture with Air France-KLM and Alitalia. All these commercial partnerships, which go well beyond simple code-sharing by enabling synergies on pricing, network operations or framework contracts with companies, will be combined into a single joint venture, established for a period of 15 years.
For business travellers, once this joint venture is up and running, probably at the beginning of 2018, it will mean something new with transatlantic flights from London Heathrow, where Virgin Atlantic is second only to British Airways on flights to North America. In all, the network will be able to draw on the power of twelve hubs: Amsterdam, London Heathrow and Paris-CDG on one side of the Atlantic and Atlanta, Boston, Cincinnati, Detroit, Minneapolis-St Paul, New York-JFK, Los Angeles, Salt Lake City and Seattle on the other.
With a current market share of 20 % on transatlantic routes, the joint venture aims to increase its market share to 25 %, while giving itself more clout in the face of the United-British Airways and American Airlines-Lufthansa partnerships, and responding to the rise of long-haul low-cost carriers such as Norwegian. "With our pricing options, we intend to make things more complicated for them."said Jean-Marc Janaillac, CEO of Air France-KLM.
Air France-KLM is thus positioned as the European pillar of the the world's leading network of airlines. For these alliances are not only looking across the Atlantic, but also towards Asia. Through strengthening its links with China Eastern, based in Shanghai, in which Delta holds a 3.2 % stake, Air France-KLM is consolidating its position as the leading carrier on Europe-China routes, thereby securing long-term service to the region. key business destination and gateway to the country.
At the same time, the Group intends to pursue and expand its relationship with China Southernwhich is a member of skyTeam, but which has just seen American Airlines, one of the founders of oneworld, acquire a stake in its capital. Air France-KLM intends to continue its existing joint venture agreement with Guangzhou beyond 2020, while integrating the joint venture between KLM, China Southern and its subsidiary Xiamen Airlines on the Amsterdam/Beijing/Canton/Xiamen/Hanghzou and Chengdu routes.
This development marks a new stage in the ongoing consolidation of the airline industry. "The industry is not yet consolidated, which makes it fragile and sensitive to economic cyclessaid Frédéric Gagey, Chief Financial Officer of Air France-KLM, on the occasion of the announcement of the Group's half-year results. We want to be at the forefront of this consolidation. It's quite rare for these joint ventures to last ten years. In this case, they extend over 15 years." "This coalition is not closed to other partnerships, and could be extended to other countries."said KLM CEO Peter Elbers. Aeromexico and India's Jet Airways could one day join the network.
