Air France-KLM, Delta Air Lines and Virgin Atlantic are moving to create a new transatlantic joint venture (JV) triad that includes Air France-KLM acquiring a 31% stake in Virgin and Delta taking a 10% stake in Air France-KLM.

The complex transactions, announced July 27, would see Air France-KLM buy Virgin Group’s 31% stake in Virgin Atlantic for around £220 million ($287 million), Air France-KLM said in a statement.

Meanwhile, Atlanta-based Delta, which owns 49% of Virgin Atlantic and has a transatlantic JV with the UK airline, plans to buy a 10% stake in Air France-KLM, at around €375 million ($437 million) and the three airlines will seek regulatory approval for a new transatlantic JV.

Additionally, it was announced Thursday, China Eastern Airlines will also take a 10% stake in Air France-KLM. Air France-KLM, Delta and China Eastern are all SkyTeam global alliance members.

The Delta and China Eastern stakes would inject some €751 million in Air France-KLM, which reported a €216 million 2017 first-quarter net loss, widened from a €155 million loss in the year-ago period.

Air France-KLM said Virgin Atlantic acquisition should take place in 2018, after regulatory approval, and would make it Virgin’s second largest shareholder after Delta. Delta also has a 3.2% stake in China Eastern.

The closer intertwining of the French, Dutch, UK, US and Chinese airlines will boost Air France-KLM’s competitive standing against Europe’s other large airline groups, International Airlines Group (IAG), which owns British Airways, Iberia, Vueling and Aer Lingus,  and Lufthansa Group, which owns Lufthansa, SWISS, Austrian Airlines, Brussels Airlines and Eurowings.  IAG and Lufthansa Group were the fifth and sixth most profitable airline companies in 2016, reporting net profits of $2.1 billion and $1.9 billion respectively, according to the ATW 2017 World Airline Report. Air France-KLM was in 12th place, with an $834 million profit.

The new transatlantic JV, if approved, would also be a powerful boost against traditional competitors in this important market—British Airways (BA) and American Airlines (AA) have an immunized transatlantic JV, as do Lufthansa and United Airlines—as well as low-cost competitors such as Norwegian and WOW Air.

But it remains to be seen whether the new JV will be approved and on what terms. Air France-KLM, Delta and Virgin hold dominant or prominent positions at some of the most important hubs either side of the Atlantic, including Paris Charles de Gaulle, Amsterdam Schiphol, London Heathrow, Atlanta Hartsfield and New York JFK. If permitted, the number of daily JV transatlantic flights would grow to almost 300 from 270 today via the existing Air France-KLM, Delta and Alitalia JV.

US lawmakers, in particular, have become skeptical of the consumer benefits of US airline consolidation. With its equity stakes and potential to create what Air France-KLM chairman and CEO Jean-Marc Janaillac says will be “the number one alliance between Europe and the United States in terms of traffic,” regulators may balk at allowing a single airline group to hold such a powerful position in this market.

Virgin Atlantic founder Richard Branson said in a letter posted Thursday on his site that he would continue to be the largest individual shareholder in the airline. The Delta JV, he said, provided “a competitive alternative to BA and American Airlines’ alliance and it has created a strong platform for us to promote and support our brand in this highly competitive market.”

As the proposed new JV is scrutinized, that will likely be the argument that the three airlines will make—that it will keep transatlantic competition strong by being able to better compete against BA-AA and Lufthansa-United.

Commenting on the deal, Delta CEO Ed Bastian said, “A dynamic global landscape means it’s more important than ever for Delta to deepen ties with our global partners to provide opportunities for mutual growth. Bringing together the strengths of Delta, Air France-KLM and Virgin Atlantic into a combined joint venture will create the transatlantic partnership of choice for customers.”

The multi-way investments being pursued in these deals also illustrates how airlines round the world are increasingly turning to acquisitions and equity stakes as a way to grow. While many countries, including the US, have foreign-ownership restrictions on their airlines, carriers increasingly need to go beyond alliances and codeshares to stretch or make the most of their networks and grow revenues.

Karen Walker