Delta, Air France KLM, and Virgin Atlantic filed their request for anti-trust immunity for a transatlantic joint venture yesterday.
This would sort out a currently messy situation,
- Delta owns 49% of Virgin Atlantic. Delta and Virgin Atlantic have a joint venture between the US and UK.
- Air France KLM acquire Virgin Group’s 31% stake in the carrier. So Virgin Atlantic is now 80% owned by joint venture partners Delta and Air France.
- Delta, Air France KLM, and Alitalia have an existing transatlantic joint venture. Delta owns a stake in Air France KLM, and so does China Eastern (which Delta owns a stake in).
Alitalia is in the midst of restructuring, since Etihad pulled the plug and stopped subsidizing the Italian flag carrier. Delta had opposed Etihad’s flying to the U.S., but favored Etihad’s flying to the U.S. through Alitalia, since Delta took a chunk of that revenue. They were against subsidies, but in favor of benefit from Etihad’s subsidies of Alitalia.
The Italian government could take a majority stake in Alitalia, with a minority ownership position from another carrier that would manage the airline. The most often discussed candidate is Lufthansa, which itself has a joint venture with United and Air Canada.
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Here’s how the Delta-Air France KLM-Virgin application describes it,
(“Alitalia”) is not a party to the Amended JVA, which will not be implemented until the preexisting SkyTeam JV to which Alitalia is a party is terminated according to the terms of that agreement. Although the Parties hope to implement metal-neutral cooperation with Alitalia in the future, Alitalia is currently undergoing restructuring through the Italian bankruptcy process, and its future ownership structure is uncertain. The timing of any future agreement with Alitalia is currently uncertain.
Joint ventures seek anti-trust immunity to allow airlines to work together on schedules and pricing, and to split up the revenue they earn together on designated routes.
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Proponents argue that they’re a second-best workaround to limits on foreign ownership of airlines. There’s be no anti-trust issue getting together to decide on schedules and price, for instance, if American Airlines and British Airways were owned by the same company. But since that’s not legal, they seek an exemption to be able to do this on a more limited basis.
However joint ventures remove competitors from the field. Delta, Air France, and Virgin Atlantic won’t be competing against each other — including on product. For instance Delta, Air France KLM and Alitalia coordinated on and announced a version of basic economy together for transatlantic travel. Foreign ownership could increase competition, these joint ventures reduce competitors, so they’re a second-best indeed.