To form a deeper alliance, both Delta Air Lines, Inc. (NYSE: DAL) and China Eastern Airlines Corp. will buy 10% stakes in Air France-KLM Group while Air France takes a stake in Virgin Atlantic Airways Ltd where Delta is a major investor. The stakes in Air France will be acquired by a capital increase of 751 million euros ($876 million) and 220 million pounds ($287 million) for the Virgin Atlantic stakes.
These joint ties will provide the closest bonds between the major airlines from different continents in an industry where scope for outright mergers is limited by government imposed ownership caps. This venture deal should allow the carriers as well as members of the SkyTeam global alliance to coordinate fares and timetables on some routes while also combining co locating airport facilities and frequent flyer programs to cut costs.
Cooperation with Air France will help provide traffic from mainland Europe together with routes there. Delta also plans to have a joint venture with China Eastern on trans-Pacific routes. Currently, the company is in the process of acquiring a 49% stake in Grupo Aeromexicano SAB as well to expand trans-Atalntic alliance. The U.S. carrier also has a 9.5% holding in a Brazilian carrier called Gol Linhas Aereas Inteligentes SA. These plans are expected to be implemented in 2019.