brunos

I accept your vision. But in all the JVs I have been involved with (not in the airline industry), the detailed wording of the contract is very important, not only the general terms.
According to current press reports, the JV DL-VS makes no mention of AFKL-AZ nor is the JV DL-AFKL mentioned:

http://online.wsj.com/article/SB1000...312916158.html

That would suggest that DL can enter into a JV with VS without having to share revenues with AFKL and AZ. Maybe they will need to, and that will be a bit complicated. But nothing that a team of highly-paid lawyers cannot figure out.

irishguy28

But why would it be 50%? I expect that revenue is split on a more realistic basis. Over any given period, they can tell what "share" of the flying each airline does (I imagine that Delta has the most flights/capacity across the Atlantic, followed by Air France, KLM, and Alitalia in that order). Let's just say for argument (and I know this is not accurate) that, for a given period, the "split" (and I don't know whether it's based on seats, number of flights, ASKs, or something else) is 35:30:25:10, then Delta would get 35%, AF 30%, KL 25% and AZ 10%.

And remember that, up until now, Delta's share of the UK-North America market has been relatively small, so it hasn't been the case that they've been "giving away" oodles of profit on their tiny share of the UK market.

Though with a new JV between VS and DL, I expect that (at least the direct non-stop) flights between the UK and North America will cease to be part of the existing DL/AF/KL/AZ JV, becoming instead the sole pillar of the DL/VS joint venture. So just as the UK starts to become a far bigger market for Delta, the "profits" from that route will stop flowing to the existing JV.

af fp

Hello, any news on this one ? So far I understand that AF does not intend to invest in VS and that DL and VS will have their own JV, which may take revenue away from the AFDLKLAZ JV and could be a breach of contract. AF has also been very quiet about the DL move so far, although they could have vocally opposed or welcomed it.

Is there a parallel to be made with AF's agreement with Etihad, which goes without DL?

Is Etihad or VS going to join Skyteam? Or will we see Skyteam, and Flying Blue, weakened by outside alliances? The next step could be Korean entering into a JV with, say, Eva Air!

af fp

Actually just found this comment by Juniac in Le Figaro (from AFP): "it makes us stronger, of course [...] vs. our competition. DL is our partner."
In French: http://www.lefigaro.fr/flash-eco/201...-satisfait.php

I did not find the complete quote.

So AF seems happy...

KQ321

Interesting discussion (plus some conjecture; and some conflation between the current DL/AF/KL/AZ TATL JV and 'SkyTeam' as an alliance) on the DL-VS tie-up in this article: Delta Airlines Deal Brings Unequal Benefit To Partners

It makes the point that the DL's (presumably profitable) LHR-NA routes are included in the current TATL JV, and so the other partners in that JV may stand to lose out when the routes are transferred to the DL/VS JV. It also points out that many of DL's current slots at LHR are leased from AF/KL (freed up a few years ago, by reducing AF services to CDG, and cutting KL services to RTM and EIN, IIRC), although presumably those slots will be less important to DL once it has access to VS's slots.

I do wonder if there's the risk of dispute brewing between DL and AF/KL/AZ over the reduction of their current JV - or whether this was in fact all foreseen in the contracts for that JV (I think I read somewhere that DL has been eyeing VS since at least 2009), or whether the eventual goal is to bring VS into the DL/AF/KL/AZ JV (but they're doing it in stages, to ease regulatory approvals)...

Plus some interesting analysis that due to (current) flight schedules, even when DL and VS have co-located in the same terminal at LHR, there won't be much potential for long-haul to long-haul connections at LHR between DL and VS (although flight schedules can, to some extent, be changed if the need arises).

From a purely FB perspective, of course, until you can earn FB level miles (and access FB/ST E+ benefits) on VS-operated flights (which presumably would require VS to join SkyTeam) it's not that interesting...

irishguy28

I don't really see any parallel.

In the AF/EY case, it's (for now) just a codesharing arrangement, and the scope of the flights falls almost totally outside the scope of the DL/AF/KL/AZ Joint Venture (none of the AF/EY codeshares involve transatlantic flights). In that sense, it wouldn't have made sense to "include" DL in that particular arrangement, and DL is free to negotiate with EY if they wish.

In the DL/VS case, it's FAR MORE than just a codesharing arrangement, and it strikes at the heart of the existing DL/AF/KL/AZ Joint Venture territory - transatlantic flights, or at least US-UK flights.

orbitmic

I agree it is indeed interesting and I truly wonder what has been discussed between DL and its partners (first and foremost AF). The traditional LHR transatlantic flights operated by DL are indeed highly lucrative - in fact some of the most lucrative of the whole JV operation (hence their being included in the first series of JV operations when it first started). Fares are comparatively high and loads are very high not least in J. The new routes started by DL to MIA and BOS were more problematic but there, DL can now join forces with VS to make them viable and as mentioned in the blog post, also join forces to serve California direct as LAX and SFO are also important airports for DL's presence and connects to several of their (partly NW-inherited) Westward services.

If nothing has been planned to counteract that, AF-KL could be the major loser of the DL-VS deal. I guess that there are two possible stories here. Either, it has been taken into account already in the deal and a mutually acceptable middle term solution (which could include VS joining the AFKL-AZ-DL JV) has already been agreed without details being made public, or DL offered to AF to join the VS deal and cash-poor AF not having the means or desires to say yes (too busy working on their fabulous Mini offer ) implicitly lost the right to complain about what DL was negotiating. After all, AF has one thing to gain from the DL-VS JV which is that it really annoys BA/IAG which might lose some leeway on their own TATL margins as an alternative more structured competitor starts convincingly competing for corporate contract and corporate business against its arch-dominant airline.

As for the longer term future and question of connectivity, the big question to me has to do with AF's earlier plans of an AF-KL JV with Chinese airlines. MU and CZ both fly to LHR, their flights are apparently highly successful, and combining the transatlantic strength of the DL-VS and AFKL-AZ-DL JVs to the potential strength of an AFKL-CZ-MU or AFKL-AZ?-CZ-MU-VS? JV (VS fly to HKG and PVG) could start offering some truly interesting synergies.

brunos

Apparently, the DL-VS deal will take a few more months to complete.
But DL philosophy seems clear:
http://www.bloomberg.com/news/2013-0...team-link.html
DL consider that it has two separate JV one for UK the other for Continental Europe and that the future is for bilateral JVs, not alliances.
And DL has a strong financial position as opposed to AFKL or AZ, so it can dictate terms, to some extent.

irishguy28

brunos

VS has been talking with AFKL for years. Let's hope that they do come up with some significant JV rather than a few codeshares that would be mostly meaningless except for UK FB members.

orbitmic

^ JV and alliance integration (which would become even more likely if indeed VS starts partnering with AF-KL-AZ) would be great. VS could bring an interesting network, outstanding lounges, and very good J and Y+ products (Y is decent too).

hugolover

Way too good product compared to KL-AF!