Alitalia Will Join Air France-Delta Joint Venture to Share Costs, Revenue

Alitalia SpA will deepen its partnership with Air France-KLM Group and Delta Air Lines Inc. by sharing transatlantic revenue and costs to help boost profit.

The accord between the airlines, all of whom are members of the SkyTeam alliance, could benefit Alitalia’s pretax earnings by about 50 million euros ($63 million) annually in two or three years, Chief Executive Officer Rocco Sabelli said at a news conference in Rome today. The benefits will come primarily from closer ties with Delta, he said.

“This is the way forward, through alliances and joint ventures,” the CEO said. “That will allow us to maintain profit and investments in the long term.”

The venture represents about $10 billion in sales and 26 percent of all transatlantic flights, according to a statement today. The agreement covers 250 flights a day and 500 destinations in Europe and North America.

Once in the venture, Alitalia will be able to jointly plan pricing, schedules and marketing with other carriers, allowing it to maximize revenue and limit investments. The linkup could allow carriers on both sides of the Atlantic to operate as a single airline in a regulatory climate where mergers aren’t feasible, Sabelli said.

Transatlantic Passengers

The venture with Air France is one of several groupings set up to boost efficiency on transatlantic routes. British Airways Plc, Iberia Lineas Aereas de Espana SA, and AMR Corp.’s American Airlines are waiting for final approval of a venture from U.S. and European regulators.

“What the airlines gain out of these alliances is the ability to pool resources,” said Dan Solon, a Barcelona-based independent consultant for the commercial airline industry. “It will also give Alitalia a halo effect in terms of being perceived as one of the big three clusters of airlines.”

British Airways, Europe’s third-biggest carrier, and American Airlines, the second-biggest in the U.S., were already partners in the Oneworld alliance when they created their pact. Finnair Oyj and Royal Jordanian Airlines are also part of that venture, which is being evaluated by the European Union.

Rome-based Alitalia sold its main assets to the CAI group of Italian investors in December 2008, and combined with smaller rival Air One SpA. In January 2009, the airline’s board agreed to sell a 25 percent stake to Air France. Sabelli today ruled out a merger with Air France.

Sabelli said joining the venture was one of the goals for CAI when it took over Alitalia. The company is performing well and won’t need a capital increase because it has about 500 million euros in cash and credit lines available, the CEO said. Revenue in the first half rose 10 percent.

To contact the reporters on this story: Steve Scherer in Rome at sscherer@bloomberg.net; Sara Gay Forden in Milan at sforden@bloomberg.net

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