A complex merry-go-round of corporate activity was announced last night which will lead to …. well, it isn’t fully clear.
In the first transaction, Delta Air Lines and China Eastern Airlines have each agreed to buy a 10% stake in Air France KLM for a combined total of €750m.
Back to back with this, Air France KLM will buy a 31% stake in Virgin Atlantic from Sir Richard Branson. The price is £220m.
The new Virgin Atlantic shareholding structure will be:
Delta Air Lines 49% (the legal maximum for a non-EU company in an EU airline)
Air France KLM 31%
Sir Richard Branson / Virgin Group 20% – and he remains chairman
What next for Virgin Atlantic?
The next steps are not clear. There are bound to be some changes, however, now that Branson no longer has a controlling shareholding. Delta will be effectively calling the shots as long as it has Air France KLM on its side.
There are two things which we know as fact.
Air France KLM will become a Virgin Atlantic earning and redemption partner. This was confirmed yesterday. It will massively improve the value of Flying Club miles even without full SkyTeam membership.
(You will also be able to redeem Flying Blue miles for Virgin Atlantic flights.)
Don’t expect to be able to redeem for the acclaimed Air France First Class seat, however, as even non-elite Flying Blue members cannot do this.
Virgin Atlantic, Delta, Air France and KLM – together with Alitalia, if it survives – will apply to form a joint venture for their transatlantic services. This would share revenue and profits across all four airlines. It is difficult to see permission being refused given that BA, Iberia, Finnair and American have an identical arrangement.
These things were announced yesterday. What was not discussed is SkyTeam.
This deal must surely put the notion of Virgin Atlantic joining the SkyTeam airline alliance back on the table.
Most people, including myself, expected this to happen after the original Delta investment a couple of years ago. Virgin Atlantic continued to plough its own furrow, however. I would say that the chances of Virgin joining SkyTeam are now substantially increased.
It has to be said that SkyTeam has the reputation of being the ‘leftovers’ alliance. Once you get beyond Air France KLM and Delta, you rapidly drop into less relevant – from a UK perspective – airlines. We are talking Aeroflot, Aerolineas Argentina, AeroMexico, Alitalia (whilst it lasts), Garuda Indonesia, Kenya Airways, Saudia etc.
To be fair, SkyTeam membership would give your Virgin Flying Club miles access to 16,609 daily flights to 1,707 airports. Virgin Flying Club status members would get access to over 600 new airport lounges.
Any application to join SkyTeam would take at least 18 months to complete so we are unlikely to see any immediate changes.
In the meantime, we can look forward to earning and spending Virgin Flying Club miles on the global networks of Air France – KLM which can only be good news.
(Want to earn more Virgin Flying Club miles? Click here to see our recent articles on Virgin Atlantic and Flying Club and click here for our home page with the latest news on earning and spending other airline and hotel points.)