Capturing and Delivering Value in the Trans-Atlantic Air Travel Market: The Case of the Air France-KLM, Delta Air Lines, and Virgin Atlantic Airways Strategic Joint Venture

Glenn Baxter

doi:10.14311/mad.2019.01.03

Abstract

<p class="keywords">This paper presents a case study of the Air France-KLM, Delta Air Lines, and Virgin Atlantic transatlantic joint venture, one of the world’s largest strategic passenger joint ventures. The study used a qualitative research approach. The data gathered for the study was examined by document analysis. The strategic analysis of the joint venture was based on the use of Porter’s Five Forces Model. The study found that the joint venture has evolved over time through the addition of KLM Royal Dutch Airlines, Alitalia, and Virgin Atlantic Airways to the original joint venture between Air France and Delta Air Lines. The joint venture has provided significant synergistic benefits to the partners and has allowed the partners to access new markets and to participate in the evolution of the transatlantic air travel market, one of the world’s major air travel markets. The joint venture has also enabled the venture partners to enhance their competitive position through strengthened service offerings, a comprehensive route network that offers customers a high level of connectivity, and greater flight frequencies within their own route networks, all of which creates value for the partners. A limitation of the study was that the annual revenue, revenue passenger kilometres performed, or passenger load factors data was not available. It was, therefore, not possible to analyze the business performance of the joint venture.</p>

Highlights

The global air transport industry has witnessed a number of significant changes since the deregulation of the United States air travel market in the late 1970s and the European industry in the 1990s
The origins of the Air France-KLM, Delta Air Lines, and Virgin Atlantic Airways Joint Venture date back to 1989 when KLM Royal Dutch Airlines ratified a pioneering agreement with United States-based Northwest Airlines.[88]. This agreement followed the anti-trust immunity granted to the two airlines by the United States Department of Transportation (DOT) in 1993.[89]. This alliance agreement was facilitated following the signing of an “Open Skies” agreement between the United States and the Netherlands.[90]
An “open new routes were made possible following the conclusion of skies” agreement is a type of air services agreement (ASA) in the European Union-United States “Open Skies” agreement

Summary

Introduction

The global air transport industry has witnessed a number of significant changes since the deregulation of the United States air travel market in the late 1970s and the European industry in the 1990s These changes include a reduction in the number of major airlines, the intensified reorganization of airline routes into hub-and-spoke networks, the rapid growth in the number of low-cost carriers (LCCs) and, still occurring, the formation of strategic alliances between international carriers. The latter represents a significant innovation in the global airline industry. The joint venture represents a partial combination of the partner’s resources [19], and the owners participate in governing the new business entity. [20, 21]

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