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U.S., Europe and China to form airline Supergroup

PARIS/AMSTERDAM: July 27, 2017. The Air France-KLM Group is planning to increase its capital base by €751 million to help finance a new joint venture with Alitalia, Delta Air Lines and Virgin Atlantic that includes acquiring a stake in the UK airline for £220 million.

Subject to regulatory and shareholder approvals, the new owners of Virgin Atlantic will be Delta (49 percent), Air France-KLM (31 percent), and the Virgin Group (20 percent).

At the same time, Delta and China Eastern will each acquire a 10 percent stake in Air France-KLM for an undisclosed sum.

The planned creation of an airline Supergroup, while retaining individual brands and corporate structures, would replace two existing ventures between Delta and Virgin Atlantic, and Air France-KLM and Alitalia.

KLM Cargo SPLThe Franco-Dutch airline retains a 7.08 percent stake in Alitalia, currently in Administration, while Etihad owns 49 percent.

Earlier this week, Etihad reported a net loss of US$1.87 billion for its 2016 financial year that included an US$808 million charge on "certain assets and financial exposures to equity partners, mainly related to Alitalia and airberlin".

Air France-KLM says extending its existing partnerships with Delta, Alitalia and China Eastern for the next 15 years allows for "an associate partner status enabling the inclusion of other players".

Jean-Marc Janaillac, Air France-KLM CEO commented: "With our partners Delta and Virgin Atlantic we are pleased to reinforce our transatlantic partnership, offering our customers even more choice between Europe, UK and the United States via twelve hubs on both sides of the Atlantic."

Craig Kreeger, Virgn Atlantic CEO added: "We couldn't be more excited that the next stage of our growth will be at the heart of the strongest partnership for customers traveling between Europe and North America."

The proposed cross-culture investments from China, the U.S., and Europe coincide with Air France-KLM reporting a group profit of €151 million on revenue of €12.3 billion for the first half of 2017. On an individual level, KLM produced a net contribution of €301 million and Air France €61 million.

The group described its cargo result as a "gradual turnaround" with revenue of €1.01 billion for H1, down 2.5 percent from the same period last year.

In September 2015 China Eastern Cargo signed a network agreement with Air France KLM Martinair Cargo.

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