Virgin Atlantic: entry into Air France-KLM/Delta JV welcomed by rivals as AF-KLM plans 31% stake

Senior executives of competitors to the two Delta led North Atlantic joint ventures have welcomed plans to consolidate the two into one. The plans effectively bring Virgin Atlantic into the SkyTeam-centric JV of Delta, Air France-KLM and Alitalia (but Virgin is not joining SkyTeam).

This strengthens this JV's position against the other two JVs centred on members of Star and oneworld. Nevertheless, both IAG's CEO and Lufthansa's CFO have called the move positive. This may reflect their concern at the rise of fast growing smaller competitors in this lucrative route region.

In addition to the merger of this JV with the Delta/Virgin JV, a series of equity tie ups is also planned.

In Jul-2017 Air France-KLM announced that it would buy 31% of Virgin Atlantic from Sir Richard Branson's Virgin Group. In addition, Delta (which owns 49% of Virgin Atlantic) and China Eastern are to invest fresh equity in Air France-KLM, each taking a 10% stake. Air France-KLM shareholders will be asked for approval on 4-Sep-2017.

Although bringing Virgin Atlantic into the wider JV with Air France, KLM, Alitalia and Delta seems to be a sensible move and was not unexpected, Air France-KLM's decision to buy into Virgin Atlantic was more surprising.