Wednesday 21 April 2021

Air France-KLM strengthens its alliances through Delta, Virgin deals

Air France.com via Wikimedia Commons

Air France-KLM has formed new joint ventures with Delta and Virgin Atlantic and is strengthening its ties to China Eastern in moves seen as a bid to cement its position as the European leg in a global network. All are members of the SkyTeam airline alliance.

Under terms of the deals, both Delta and China Eastern will buy 10% stakes in the Franco-Dutch combine for a total of €751mn in newly issued shares, the Financieele Dagblad said on Friday. Air France-KLM is also taking a 31% stake in Virgin Atlantic for about €256m.

The transactions are part of the long-awaited consolidation in the global aviation industry. In recent years, the fast-growing air carriers around the Persian golf have been building up significant stakes in airlines they work with.

Cross-participations

‘There are a lot of cross-participations in the industry. It’s important that Air France-KLM takes part and secures its position as a leading player on the global stage,’ said KLM CEO Pieter Elbers.

Virgin Atlantic has a strong position in the lucrative trans-Atlantic market from London. ‘KLM has a relatively weak position in London. But through Virgin Atlantic, we can now offer flights from London to New York,’ Elbers said.

Buoyant second-quarter

Higher ticket prices combined with growth in passenger numbers helped push Air France-KLM’s second-quarter operating profit to €496m, this is €179m more than in in the year-earlier period. The company booked turnover of €6.6bn in the period.

KLM made the largest contribution to the earnings growth: its second-quarter turnover was 9.4% higher at €2.7bn. The Dutch flag carrier booked operating profit of €301m in the period, compared to only €61m for Air France.

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