As joint ventures go, it's a whopper. And as developments in the global airline industry go, it's pretty consequential too.
On Wednesday Air France-KLM and Delta Air Lines Inc. (NYSE:DAL) said they had
completed their long-anticipated deal to combine operations over the North Atlantic. The deal involves sharing costs and revenues ($12 billion worth of the latter) on 200 flights and 50,000 seats a day. It teams the airline with the most passengers (Delta) with the one that has the most revenue. As Reuters reports,
the deal is one of three grand alliances taking shape in a developing battle of the Atlantic.
The airlines said they expect about $150 million in cost synergies apiece. As for governance -- well, it was bound to be complicated. The press release describes the setup this way:
"An executive committee comprising the three CEOs and a management committee comprising representatives from Marketing, Network, Sales, Alliances, Finance and Operations will define strategy. Ten working groups will be responsible for implementing and managing the agreement in the sectors of network, revenue management, sales, product, frequent flyer, advertising/brand, cargo, operations, IT and finance. The joint venture will not lead to the creation of a subsidiary."The parties can only bail out with a three-year notice, after an initial 10-year term. -
Kenneth Klee
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