UPDATE 2-Air France-KLM, Delta to share Atlantic

THREE ALLIANCES

The deal is part of a trio of grand alliances taking place in a new Battle of the Atlantic between global carriers.

British Airways (BAY.L), American Airlines (AMR.N) and Iberia (IBLA.MC) are seeking approval to co-operate on those routes with a decision due by October. Continental (CAL.N) aims to join an existing alliance between United Airlines (UAUA.O) and Germany's Lufthansa (LHAG.DE).

United pilots want to block that deal over job fears.

Delta Chief Executive Richard Anderson sought to reassure his own 80,000 staff over the Air France-KLM tie-up.

"Our employees will benefit because being part of a strong vibrant airline is ultimately good for them," he said.

Virgin Atlantic, whose owner Richard Branson has branded the AA-BA plans a "monster" monopoly, cautiously backed Delta.

"There is good consolidation and bad consolidation, and this could be good consolidation. Whereas BA and American are already the two biggest transatlantic carriers, Air France and Delta do not overlap on anything like the same scale," a spokesman said.

After beating its own latest profit warning for the year to March 31, Air France-KLM pointed to signs that the economy is stabilising but said there was no evidence yet of a recovery.

It reported a 2008/09 operating loss of 129 million euros compared with its March forecast of 200 million. [ID:nLJ685038]

"The results were better than expected due to costs and their comments about signs of stabilisation in both cargo and passenger," said aviation analyst Stephen Furlong at Dublin-based brokerage Davy.

Air France-KLM said it had shed 2,700 posts in 2008/09 without resorting to compulsory sackings and predicted 3,000 more positions would go in the current financial year.

The results came ahead of full-year operating losses expected to be posted by British Airways (BAY.L) on Friday. (Additional reporting by Blaise Robinson; Editing by Simon Jessop and David Holmes)