Air France-KLM In Talks with Air Europa to Extend JV Network

Air France-KLM is holding discussions with Air Europa, the airline subsidiary of Spanish travel group Globalia, to form a joint-venture covering routes between Europe and Central and South America that could go into operation next summer.

“This triumvirate has not been sitting idle for the last three months,” noted Pieter Elbers, CEO of KLM and member of the group’s ad hoc management committee put in place in mid-May, as enduring labor unrest prompted the resignation of Air France-KLM chairman and CEO Jean-Marc Janaillac.

The Air Europa joint venture would be a “tremendous step forward for us,” Elbers said. Meanwhile, the process of combining the transatlantic joint venture between Delta Air Lines and Virgin Atlantic with the Delta-Air France-KLM JV remains “on track” for implementation from April next year. Separately, the group has begun talks with Gol over the next phase of their cooperation, which, according to Elbers, stands as a textbook example of how partnerships can build the group’s network. One of four passengers disembarking an Air France or KLM aircraft in Brazil continues on Gol’s domestic or regional network, he pointed out.

The JV with 8.8 percent shareholder China Eastern Airlines will see two new routes next year—Paris to Wuhan and Paris to Kunming—and the two separate JVs with Air France and KLM with China Southern and Xiamen Airlines have merged into one. In parallel, the cooperation with China Eastern and Xiamen has expanded with new 787 maintenance contracts for Air France-KLM’s MRO arm.

Frédéric Gagey, Air France-KLM’s CFO and interim group CEO, said he acknowledged that its JV and SkyTeam partner China Southern is considering a JV with IAG, but “authorizing a member of an alliance to work with a member of another alliance is in the value JV rules. And it is even quite often a provision,” he said during a conference call to brief analysts on the group’s results for the first six months. Air France-KLM reported a first-half operating profit of €228 million ($266 million), down from a €553 million profit in the year-ago period, due mainly to a €335 million impact of labor unrest and 15 days of strikes at Air France. KLM posted a first-half operating profit of €388 million, while its much larger French counterpart lost €164 million on operations.

Gagey remained tight-lipped on a replacement for Janaillac, stressing management is not involved. “Clearly [it is] a question which is in the hands of, first, the nomination committee of the board and, second, the board itself,” he said. “And the process is just continuing.” He reiterated the group had decided it could not open talks with Air France unions before new management took charge.

Source: AIN