Alitalia Joins Northwest/KLM Partnership. Airlines Seek Anti-Trust Immunity

10th May 1999

Northwest Airlines, Alitalia Italian Airlines and KLM Royal Dutch Airlines announced today that Alitalia will join the Northwest/KLM trans-Atlantic joint venture. The three airlines made the announcement at the signing of a Commercial Cooperation & Integration Agreement and an Alliance Coordination Agreement held at the Rainbow Room in New York.

“These agreements are very good news for travelers,” said Doug Steenland, Northwest executive vice president. “The Northwest/KLM joint venture has produced more air service and lower air fares. We look forward to extending those benefits to the areas served by our new partner.”

“KLM and Northwest have developed the most far-reaching and progressive aviation joint venture in the world,” said A.B. van Luyk, KLM executive vice president - passenger division - “we have worked hard to stay at the forefront of this innovative development and the results have been extremely positive for our companies and our customers. Since 1992 we have increased the number of trans-Atlantic flights we operate by 87 percent. We are delighted that Alitalia will be joining us in continuing this record of growth and improving service.”

“We believe the Northwest/KLM joint venture is the most advanced form of aviation commercial cooperation in the world,” said Mario Rosso, Alitalia executive vice president strategies and alliances, “we are delighted to be joining this venture.”

As part of their agreement, Northwest, KLM and Alitalia are making a joint application to the U.S. Department of Transportation for immunity from the U.S. antitrust laws. The request is similar to the Northwest/KLM application approved by the DOT in 1993 and will allow Alitalia, KLM and Northwest to coordinate their trans-Atlantic route networks, enhance the efficiency of their respective operations and facilitate their ability to provide seamless service to the public. Subject to governmental approval, the three airlines will pursue opportunities in the following areas:


* Codesharing
* Integration of the airlines` frequent flyer programs
* Reciprocal airport lounge access
* Seamless service for connecting passengers
* Coordination of schedules at U.S. and Italian hubs and gateways
* Route and schedule planning and coordination throughout their global route networks
* Pricing and inventory management
* Establishment and management of marketing, advertising, sales and distribution networks, staffs, programs, policies and systems such as the creation of joint sales office and the development of joint bids for corporate and government contracts
* Integration, design and development of information systems including inventory management, yield management, reservations, ticketing, distribution and other operational systems
* Creation and implementation of cooperative cargo services, including development of cargo products and coordinated use of cargo facilities and terminals
* Sharing of facilities and services at airports served by one or more alliance members
* Procurement of goods and services, including station and ground handling services, general goods and services, field and station supplies, catering, crew uniforms, information technology products and services, fuel and maintenance

The carriers expect to implement their agreements upon approval of their request for anti-trustimmunity by the U.S. Department of Transportation.

The benefits of alliances to the travelling public was the subject of a study, conducted by Professor Jan K. Brueckner and Ph.D. student W. Tom Whalen of the University of Illinois (Urbana-Champaign), that examined the benefits of international alliances to the travelling public.

The two economists found that interline passengers, who fly on two airlines to make their trip, pay substantially lower fares when the carriers are alliance partners. The interline fares charged by unaffiliated carriers are, on average, 36 percent higher than the fares charged by alliance partners. Using the Northwest/KLM alliance as a case study, Brueckner and Whalen concluded that without the Northwest/KLM alliance consumers would annually pay between $111 and $185 million more for air travel.

Northwest Airlines, together with Alitalia, KLM, Continental and our global travel partners, serves more than 500 cities in nearly 100 countries on 6 continents.



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