The companies will create two joint ventures and share revenues.

'One ticket to the world'

The tie-up will be centered around the airlines' main hubs in Amsterdam, Milan and Rome.

The alliance will carry the slogan "The Alitalia-KLM Alliance: One Ticket to the World" and focus on co-ordinating both networks to minimise transfer times between flights.

Alitalia and KLM say that together they will serve more than 400 destinations in over 80 countries, in a move that will benefit both their customers and their revenues.

KLM's chairman Leo van Wijk estimates that the passenger joint venture will generate $380m in added value over three years and $65m for the air freight business.

KLM and Alitalia frequent flyer programmes will earn airmiles on both networks.

US connection

The alliance will concentrate on developing the two companies' European market share and will complement KLM's alliance with US-based Northwest airlines. Alitalia will join their transatlantic co-operation.

The joint venture with Northwest Airlines gives KLM and Alitalia access to the US market

However, the deal is not a merger and does not involve a share swap.

Furthermore, both sides have many escape clauses.

The co-operation agreement will be terminated if a third party acquires a controlling stake in either airline.

It is also dependent on Alitalia being fully privatised by 30 June 2000.

Both airlines said in December 1997 that they would develop an alliance. The long delay in announcing details made industry experts doubt whether KLM and Alitalia would ever reach a deal.

Alitalia's chief executive Domenico Cempella said "no one can now say that KLM and Alitalia are play acting".

The delay was partly blamed on drawn-out negotiatons between Italy and the United States over a "conditional open skies" deal, which regulates the mutual access to landing slots in both countries.

This agreement was concluded recently and forms a crucial step towards obtaining antitrust immunity when Alitalia joins the KLM/Northwest venture.