Air France-KLM, UK long-haul carrier Virgin Atlantic and US major Delta Air Lines said they signed “definitive agreements” for their transatlantic joint venture (JV) on May 15.

In July 2017, Air France-KLM, Atlanta-based Delta Air Lines and Virgin Atlantic announced plans for Air France-KLM to acquire 31% of Virgin and for Delta to take a 10% stake in Air France-KLM.

On May 15, the three airlines issued an update to say they had finalized the terms of the deal, which will now be put forward for regulatory approval.

“Upon completion, Air France-KLM will acquire a 31% stake in Virgin Atlantic currently held by Virgin Group for £220 million ($298.6 million). Virgin Group will retain a 20% stake and chairmanship of Virgin Atlantic. Delta will retain its 49% [Virgin Atlantic] stake,” the airlines said in a statement.

The agreement lays down the governance, commercial and operational terms of the expanded transatlantic JV.

“Air France-KLM, Delta and Virgin Atlantic will now coordinate efforts to secure the appropriate regulatory approvals,” the airlines said.

When the deal was first announced, the partners said the acquisition of the Virgin Atlantic shares would take place in 2018, after regulatory approval. But during an exclusive interview with ATW in March, Virgin Atlantic CEO Craig Kreeger said he was not expecting Air France-KLM to become a shareholder until early- to mid-2019.

At the time, he said getting the agreements finalized was “the gating item” and he added that timings for the US approval were “not completely predictable.”

“We think it will be something like a year, which gets us to early- to mid-2019 for when we think the deal will therefore consummate,” he said during the March interview.

From a strategic standpoint, the acquisition draws Virgin Atlantic closer to the SkyTeam alliance. Air France-KLM already has a strong relationship with fellow SkyTeam member Delta, which in turn has a maximum 49% stake in Virgin Atlantic. Meanwhile, Delta and China Eastern Airlines are each buying 10% of Air France-KLM.

Delta’s 10% stake in Air France-KLM was not mentioned in the May 15 update, because that transaction was completed at the end of 2017. Delta now holds 10% of Air France-KLM and has a seat on the Franco-Dutch carrier’s board.

In March, Kreeger said no formal decision has been taken on whether Virgin will join SkyTeam. He added that the equity strategy will secure very close links with its partner airlines.

The acquisition also creates questions over how the Air France-KLM buy-in will fit with the UK’s plans to exit the European Union (Brexit), as it will take Virgin Atlantic to at least 80% non-UK ownership (49% Delta and 31% Air France-KLM).

As the JV is scrutinized, the three airlines will be likely to argue that their tie-up will keep transatlantic competition strong, by being able to better-compete against the rival JVs between UK flag carrier British Airways-Dallas/Fort Worth-based American Airlines and Germany’s Lufthansa-Chicago-based United Airlines.

Victoria Moores