Air France and Delta Air Lines Inc. announced today that they will form an international marketing alliance, adding another giant combine to the three Euro-American blocs already competing over the Atlantic Ocean.
With the formation of this operating alliance, most of the major European and American carriers are now committed to one partnership or another; Air France had been the last European carrier to choose sides. "The pieces are in place," said Matthew Stainer, airline analyst for Credit Lyonnais Securities in London.
The matchup left Continental Airlines Inc., which had enjoyed significant cooperation with Air France and considered itself a candidate for an alliance, out in the cold. It also sent Delta partners Swissair and Sabena into a new agreement, announced today, with American Airlines Inc.
US Airways Inc. is the only other major U.S. airline without a transatlantic partner. After a disastrous partnership with British Airways in the early 1990s, US Airways has vowed not to enter any new alliance unless it is a partnership of equals. The airline is operating more than 90 percent full on its transatlantic routes and can bring nothing to the table for prospective partners.
That situation will change next year when US Airways starts taking delivery of long-range Airbus A330 aircraft. US Airways appears to be counting on the sometimes transitory nature of airline alliances and the fluidity of the alliance picture.
The alliances are the new battlefields of international air competition -- not between airlines but between blocs. As nations form regional trading blocs, airlines are combining into behemoths whose joint route networks and operating efficiencies increase their competitiveness.
"We intend that we will challenge our biggest and most successful competitors," Delta CEO and president Leo F. Mullin said, adding that Air France and Delta will seek other partners.
Airline alliances are intended to attract passengers through coordinated schedules that feed passengers through to destinations that might otherwise require long layovers or cumbersome transfers. Passengers can receive frequent-flier miles on all airlines in the partnership.
Airlines benefit from the ability to "code-share" -- sell seats on each others' flights under their own name -- and essentially add partners' destinations to their own route network.
The new alliance does not require government approval, but antitrust officials at the Department of Justice are studying airline deals that have become virtual mergers. The department has filed suit to block the alliance of Continental and Northwest Airlines Corp. because the partnership involves an equity swap, but regulators have not moved to bar marketing alliances such as the one between Delta and Air France.
For both Air France and Delta, today's agreement culminated years of difficult transition.
Air France, Europe's third-largest airline, was partially privatized only in February, and the government of France retains majority control. Last summer, a 10-day pilots strike during the soccer World Cup embarrassed company and government officials. And in 1994 it took a $3.3 billion bailout by the French government to ensure the carrier's survival.
But the airline has achieved significant cost savings in the past year and has become more efficient. In their strike settlement, pilots agreed to a three-month cooling-off period before launching future strikes, a significant concession in strike-prone France.
Air France is blessed with two attributes that enhanced its appeal to Delta: its location in the heart of Europe, with extensive networks across the continent, and an airport, Charles de Gaulle, that is one of few in Europe with significant expansion potential.
CAPTION: Air France, whose planes are shown at left next to Delta's, is the last major European carrier to enter into an international marketing alliance.