Air France-KLM,Delta Air LinesandVirgin Atlantic Airwaysplan to dominate the transatlantic market under a new strategic partnership unveiled on 27 July.

The enhanced joint venture will replace the separate existing agreements thatDeltahas with Air France-KLM andAlitaliaon the one hand, and with Virgin on US-UK routes.

The partners say it will allow Air France-KLM,Deltaand Virgin, plusAlitalia, to co-ordinate routes and schedules, share revenues and expenses, and jointly market and sell flights, once regulatory approval is granted.Alitalia, which filed for extraordinary administration earlier this year, was not among the partners announcing the new enhanced joint venture.

"With our partnersDeltaandVirgin Atlantic, we are pleased to reinforce our transatlantic partnership, offering our customers even more choice between Europe, UK and theUnitedStates," states Jean-Marc Janaillac, chief executive of Air France-KLM.

The partnership comes with a new joint shareholding structure under which Air France-KLM will buy a 31% stake inVirgin Atlanticfor �220 million (USD 287 million), andDeltawill acquire a 10% stake in Air France-KLM for €375 million.Deltaalready owns a 49% stake inVirgin Atlantic.

The deal is an expansion of Atlanta-basedDelta's equity partnership strategy, which it has successfully implemented withAeromexico,China Eastern Airlines, Gol andVirgin Atlantic.

Equity partnerships allow airline management teams to align and work together, increasing the opportunity for success, argued Steve Sear,Delta's vice-president of international, in response to questions about the strategy during a media briefing on 27 July.

"We take a very active approach where you've seen historically, maybe, [airlines] take a passive role," he said when the proposed partnership was compared toEtihad Airways' equity investments.

High-profile financial challenges atAir BerlinandAlitaliahave weighed heavy onEtihad, and were cited by the Abu Dhabi carrier as a factor in its slip to a full-year loss in 2016.

Gol alone amongDelta's airline investments has faced financial issues, owing to the recession and political turmoil that enveloped Brazil in 2014. Sear says the US carrier has taken an active role in Gol's restructuring, extending the Brazilian airline a USD 300 million loan in 2015 and taking over leases for 12 aircraft in 2016.

COMPETITIVE PRESSURES

Competitive pressures, including new "value" airlines as well asAlitalia's financial woes, prompted the discussions that led to the new partnership, notes Frederic Gagey, Air France-KLM's chief financial officer.

Sear, meanwhile, says: "When we looked at the global landscape and how it is today, it made a lot of sense to partner."

Executives atDeltahave repeatedly cited the expansion of long-haul low-cost carriers, includingNorwegianand Wow Air, as pressuring yields and prompting the US airline to re-evaluate its offerings. One element of that was to increasingly focus on flying to partner hubs in Europe, something that the new venture will further enable.

Norwegianplans to grow transatlantic capacity by 58% this year, FlightGlobal schedules data shows. This includes new services fromParis Charles de Gaulleto Orlando, and fromLondon Gatwickto Denver and Seattle.

Paris isAir France's main base, London is home toVirgin Atlantic, and Seattle is aDeltahub.

Meanwhile, uncertainty surroundsAlitalia, in whichEtihadowns a 49% stake, as it continues reorganisation efforts. The Italian carrier joined the Air France-KLM and Delta transatlantic joint venture in 2010, and is a partner of both in SkyTeam. It did, though, serve notice on a European joint venture with Air France-KLM as of January this year.

Administrators at the Italian carrier have now launched a search for fresh investment. Reports indicate thatEasyJet,LufthansaandRyanair, as well asEtihaditself, are among those to have expressed preliminary interest.

The Italian carrier's weakness opens the door to a change of strategy in Rome that could see the carrier becoming a more concerning competitor to the likes ofAir France, Delta andVirgin Atlantic, especially if it pairs up with one of the low-cost juggernauts.

"It is true thatAlitaliahas been one of the elements pushing us to discuss the future of the joint venture, but I will not consider it as the main element," says Gagey.

If all goes according to plan, including shareholder approval and regulatory antitrust nods on both sides of the Atlantic, the carriers hope to have their new joint venture up and running in 2018 or early 2019 at the latest.

"The reason for this venture and its timing is just that it is a very good idea," saidVirgin Atlantic's commercial chief Shai Weiss when asked about the timing, during the briefing.

ATLANTIC LEADER

Air France,Alitalia, Delta,KLMandVirgin Atlantictogether will control 27.6% of the 84.3 million seats scheduled between Europe and the USA this year, schedules show. Prior to the proposed deal, the four without Virgin had a 22% share of the market.

The proposed joint venture would put them ahead of the immunised joint ventures ofAmerican Airlines,British Airways,IberiaandFinnair, and that ofAustrianAirlines,Brussels Airlines,Lufthansa,SwissandUnited Airlines– the latter tie-up also includesAir Canada– that are both scheduled to have roughly 23.8% shares of the Europe-USA market in 2017, schedules show.

By comparison,Norwegianwill have a 3.7% share of the transatlantic market, schedules data shows.

Virgin Atlantic's chief executive Craig Kreeger states that "the next stage of our growth will be at the heart of the strongest partnership for customers travelling between Europe and North America".

He adds: "Together with our friends at Air France-KLM and Delta, we will build on this vision of our teams creating irresistible experiences for customers flying on our network."

In addition to the largest block of jointly managed capacity flying the water jump,Air France, Delta,KLMandVirgin Atlanticwill control 86.4% of transatlantic seats from Amsterdam and 70% from Paris in 2017, the single largest shares in each market, schedules data shows. They will be second to only American-BA atLondon Heathrowwith a 23.7% share of transatlantic seats.

The carriers' separate releases do not includeAlitalia'sMilan MalpensaorRome Fiumicinobases in their list of joint transatlantic European hubs

American declined to comment on the proposed deal, andUnitedwas not immediately available.