Delta Air Lines, Air France-KLM and Virgin Atlantic unveiled plans on Thursday to combine two overlapping transatlantic joint-ventures, cemented by $1 billion of equity deals as airlines brace for competition and wider consolidation.
The surprise realignment comes alongside a separate deal for Air France-KLM to deepen its commercial ties with China Eastern to build what it described as the European leg of a global network.
The shake-up is designed to strengthen partnerships between major carriers on the North Atlantic, where new low-cost entrants have shaken up the market in the last year.
It will also give a boost to Air France-KLM, with both Delta and China Eastern taking stakes in the Franco-Dutch group.
The transatlantic partnership combines existing joint-ventures between firstly Air France-KLM, Delta and Alitalia, and secondly between Delta and Virgin Atlantic, Air France-KLM said.
The status of troubled Alitalia in the new alliance structure was not immediately clear.
The deal will give the partners collectively a stronger position on the North Atlantic market with 27 percent of capacity, ahead of rival partnerships, according to Flightglobal Schedules data.
"What it gives the ability to do is manage capacity and pricing more broadly on the Atlantic, assuming they get anti-trust immunity,” Robert Mann, analyst at R.W. Mann & Co, said.
Under deals set out by senior executives of the airlines in a joint conference call, Air France-KLM will buy 31 percent of Virgin Atlantic from Richard Branson's Virgin Group for around 220 million pounds.
Delta and China Eastern will each acquire a 10 percent stake in Air France-KLM by subscribing to new shares through reserved capital increases totalling 751 million euros.
Delta shares traded down just under 1 percent, weighed by disappointing third-quarter outlooks by rival U.S. carriers.
Analysts noted that the reshuffle would bring Virgin Atlantic into the wider North Atlantic venture.
However airlines analyst James Halstead, a managing partner at consultancy Aviation Strategy, said the structure raised questions about Virgin Atlantic's future traffic rights from the UK after Britain's planned exit from the European Union, since it would no longer be controlled by UK interests.
The deal makes Air France-KLM the second largest shareholder in Virgin Atlantic after Delta, which owns a 49 percent stake, and reduces Virgin Group's stake to 20 percent.
Shai Weiss, chief commercial officer of Virgin Atlantic, said the transaction had been drawn up on the basis of current EU regulations and that it was too early to say what changes Brexit would bring to the regulatory landscape.
"The rules in front of us today are European; this (deal) complies with those. We will deal with any changes when they come," he said.
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