How does the JV with AF/KL work?
 

I was curious if anyone had any knowledge of the inner-workings of the DL/AF/KL joint venture. If I understand correctly, the airlines have effectively merged their trans-atlantic operations and are effectively operating as a single carrier. This means that they share revenues and costs, jointly make decisions regarding fares, routes, aircraft, etc., and have integrated their sales and revenue management operations.

So, a few questions:

1. How are decisions made? I've heard that all revenue management (fare setting, inventory management, etc.) is made by an Amsterdam-based team that encompasses employees from all three carriers. So, do they act as a single team, much like the traditional revenue management group within a single airline? How does the JV decide which routes to offer and what aircraft to fly? Given that all revenues and costs are shared, can AF just decide that it wants to fly 6x 77Ws a day between MAN and LAS and force DL to split the money loss on the route?

2. How are revenue and costs split among the carriers?

3. Will we see further integration of ground operations? e.g., Delta handling AF/KL in all U.S. airports, and AF/KL handling DL in all European airports?

4. Does the JV have integrated corporate contracts with key clients? e.g., a single agreement covering all three carriers?

5. What are the major differences between a JV and a traditional code-sharing relationship? Obviously the ability to jointly set routes, fares, etc., and split revenues/costs is huge. But in a traditional code-sharing arranagement, how does the financial picture work? Does the ticketing carrier pay the operating airline an agreed upon fee per passenger?

Well, I don't know all of the answers, but some of them would seem pretty obvious:

1) I would presume that what keeps AF from simply flooding the market with loss-making routes is a) that they need agreement from their partners, b) 50% of money down the drain is still money down the drain, and c) AF has an opportunity cost - every plane they send across the Atlantic is one that they might not be able to fly to Asia or Africa. Obviously, airlines are very good at losing money, but I don't see why the decisions being made in the JV would diverge that much from the decisions made individually.

2) I don't know. I always thought it was 50/50, but I really don't know.

3) I would presume that we would see this where it makes sense. I don't believe that AF or KL really have a huge presence outside of AMS (where they already do the ground-handling) and CDG (not sure who does it there, as I've only flown on AF there). In other European locations, AF and KL will often use contract ground staff.

4) I believe that AF/KL are the primary point of contact for negotiations for ex-Europe contracts and that DL is the primary point of contact for negotiations for ex-US contracts.

5) I think the first part of your statement is the beginning and the end. It basically amounts to a merger of your TATL operations and brings many of the synergies that a merger would bring.

Is there any advantage to the customer from this joint venture? It seems to me that the 3 airlines would just fix prices forcing the customer pay more.