Skies look friendly for trans-Atlantic travelers

A joint venture between Air France-KLM and Delta will benefit trans-Atlantic travelers looking for more nonstop flights to airports such as London's Heathrow, though analysts anticipate little impact on fares.

Air France-KLM Group and Delta Air Lines are forming a joint venture that will allow them to share profits and up to an estimated $8 billion in annual revenue on trans-Atlantic routes.

The move announced Wednesday follows the new Open Skies agreement on airline service between the U.S. and Europe.

The venture, to launch in April, will generate an estimated $1.5 billion a year in revenue in its first phase, and $8 billion a year when fully operational, the companies said in announcing the deal at Charles de Gaulle airport in Paris.

Such a deal will be a major challenge to competitors such as British Airways, United and American as airlines jockey to benefit from the Open Skies deal, and some analysts said it could spur more trans-Atlantic combinations.

The venture will first apply to all nonstop flights between Air France's French hubs and Delta's Atlanta, New York-JFK, Cincinnati and Salt Lake City hubs, representing 19 flights and more than 4,500 seats per day.

Starting in 2010, numerous flights to all destinations between Europe, the Mediterranean and North America will be part of the joint venture, they added, as well as flights between Los Angeles and Tahiti.

"The partnership will be neutral for air fares, but where consumers will benefit tremendously is in more nonstop options," said Minneapolis-based travel analyst Terry Trippler.

Anthony Sabino, a business and law professor at St. John's University, said U.S. passengers also should experience service improvements.

"Passengers demand better service and will probably get better service because the lucrative trans-Atlantic dollar is something all these airlines want," said Sabino, who has represented creditors in airline bankruptcy cases for more than 20 years.

Delta, the third biggest U.S. carrier, will benefit from three of Air France's landing slots at London's congested Heathrow airport. These routes will include a new Heathrow to Los Angeles route operated by Air France, two Heathrow-JFK flights operated by Delta and a Heathrow-Atlanta flight operated by Delta.

"You have got to have Heathrow to be competitive ... and this gives Delta the plum over there," Trippler said.

In addition, Delta will operate three new nonstop trans-Atlantic routes: Paris-Orly to JFK, Lyon-JFK and Paris-Charles de Gaulle to Salt Lake City.

Delta Chief Executive Richard Anderson said revenue estimates were preliminary but that the company was optimistic because it was "connecting two global networks to create the world's largest global network."

Jean-Cyril Spinetta, chairman and CEO of the Air France-KLM Group, said, "We are hoping for several tens of millions of additional profitability" from the venture.

Air France and KLM combined three years ago, but are still being operated separately so as to retain landing slot privileges, notably at Heathrow where availability is extremely tight.

Delta's venture with Air France-KLM is not yet on the same level as the Northwest Airlines-KLM partnership that has been "nothing but successful," but Trippler said he expects it to head in that direction.

Along those lines, Air France, KLM, Delta, Northwest and other airlines in June filed for expanded antitrust immunity with the U.S. Transportation Department. If granted, those four airlines can establish an agreement among them and ultimately integrate their trans-Atlantic operations, according to Delta.

Another potential boon for Delta and other domestic carriers is that the current strength of the euro and other currency against the dollar should help drive traffic into the U.S., and foreign travelers often take multiple trips after they arrive, analysts said.

"International traffic strengthens domestic flights," said airline consultant Michael Boyd.