Air France-KLM and Delta Air Lines said on Wednesday they would pool revenues and costs on transatlantic flights in a new joint venture that would take effect in April 2008.
In a statement before a news conference in Paris later on Wednesday, the two airlines, which are already code-sharing partners, said they expected the venture to generate revenues of $1.5 billion a year initially, rising to $8 billion later.
They will team up on routes linking major U.S. cities and London's Heathrow airport in a direct challenge to rival British Airways. Air France told analysts on Monday it planned a new direct route from Heathrow to Los Angeles and would use Heathrow slots to serve nine U.S. destinations.
The joint venture had been expected with a view to the Open Skies pact set to liberalise transatlantic rules next spring.
The aim is to tap into sprawling U.S. domestic networks held by the three U.S. carriers, and link these with Europe's busiest airport.
Business travellers crossing the North Atlantic are BA's biggest source of profits.