A major shake up in the aviation industry was announced today with Richard Branson selling his majority 31 per cent stake in Virgin Atlantic to Air France-KLM for GBP220 million (USD360 million) while Delta Air Lines – which retains its 49 per cent stake in Virgin – is to take a 10 per cent stake in its joint venture partner Air France-KLM Group for EUR375 million (USD438 million) including a seat on the Air France-KLM Group Board of Directors.
Meanwhile, Delta and China Eastern will each take a 10 per cent stake in Air France-KLM through a share purchase in a EUR751 million capital increase. The carriers said the moves are part of a broader partnership between them and would reinforce the strategic, commercial and financial ties. The expanded joint venture, including Alitalia, will offer nearly 300 daily nonstop trans-Atlantic flights and convenient flight schedules.
“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,” said Delta CEO Ed Bastian. “Bringing together the strengths of Delta, Air France-KLM and Virgin Atlantic into a combined joint venture will create the trans-Atlantic partnership of choice for customers.”
“During the past decade, Delta’s global partnerships have fueled significant international growth,” said Steve Sear, president – International & EVP – Global Sales. “As we further develop these partnerships, our ability to align network, sales and other commercial and operational initiatives will provide even greater benefits for our customers and employees.”
The Atlanta-based airline’s existing joint venture with Air France-KLM dates to 2009, with the addition of Alitalia in 2010. In 2012 Delta launched a joint venture with Virgin Australia followed in 2013 by both a 49 per cent investment in, and joint venture with, Virgin Atlantic.
In 2015, Delta entered into an enhanced marketing arrangement with, and acquired a 3.5 percent stake in, its SkyTeam partner China Eastern. In 2017, Delta launched its joint cooperation agreement with Aeromexico and increased its equity stake in the carrier to 49 per cent. Also in 2017, Delta announced a joint venture with Korean Air Lines. Delta also holds a 9.5 per cent equity interest in Brazil-based airline GOL.
Virgin’s founder, Richard Branson said the move would help the airline he founded in 1984 better compete with British Airways and other rivals flying across the Atlantic.
“Delta has helped us considerably with feed from America, but because we don’t have more slots at 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,” Branson said in an open letter to Virgin Atlantic employees. “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.”
The intention to form a four-way strategic joint venture, Branson said, adding: “As I get a little older, I want to be certain that all the necessary building blocks are in place for Virgin Atlantic to continue to prosper and grow for the next 50 years. The airline industry has consolidated over Virgin Atlantic’s lifetime and it’s now our turn to put ourselves at the heart of an important alliance, to create a stronger customer champion and build an airline which provides great opportunities for our team around the world.”