Air France-KLM, Delta Tie-up To Reap $12B Annually

On trans-Atlantic routes the companies will operate as a single business, by coordinating operations and sharing revenues and costs. The airlines will also cooperate on routes between North America and Africa, the Middle East and India, as well as on flights between Europe and several countries in Latin America, the companies said.

The joint venture has no predefined end date, but can be canceled with a three-year notice after an initial 10-year term, the companies said.

Air France-KLM shares rose as high as 13 percent in early trading on the Paris stock exchange Wednesday after the release late Tuesday of the airline's annual results showed progress on cost-cutting. They showed that lower staff costs and marketing expenses helped it achieve a smaller-than-expected operating loss — a measure of earnings from ongoing operations — of €129 million ($175 million) compared with a net profit of €1.4 billion a year earlier.

"The cost performance was better than they expected, and plainly better than the market expected," said ABN Amro analyst Andrew Lobbenberg, noting, though, that revenue performance was worse than anticipated.

The airline also announced plans to cut its workforce and reduce its investment plans by €2.9 billion to €1.4 billion. These measures, combined with cost savings of €600 million, "should offset a significant proportion of the anticipated drop in revenues," the company said.