Delta Air Lines Buys 20% Stake in LATAM
Anya Kartashova September 27, 2019
Airline relationships are more dramatic than telenovelas.
Delta Air Lines reached a deal with LATAM Airline Group and agreed to buy a 20% stake in the Chilean airline for $1.9 billion Thursday. Additionally, Delta agreed to invest $350 million to back the formation of the new partnership.
As part of the deal, Delta will buy four Airbus A350 aircraft from LATAM and undertake LATAM’s commitment to purchase 10 additional A350 planes to be delivered between 2020 and 2025.
At the moment, LATAM has a deal with oneworld partner American Airlines, but Chile’s supreme court blocked its joint-venture agreement with the Fort Worth, Texas-based carrier, citing ineffective competition. In the meantime, to move forward with the partnership, Delta will exit its stake of 9% in GOL Airlines, a Brazilian carrier and a competitor of LATAM.
“This transformative partnership with LATAM will bring together our leading global brands, enabling us to provide the very best service and reliability for travelers to, from and throughout the Americas,” Ed Bastian, Delta’s chief executive officer, said in a press release. “Our people, customers, owners and communities will all benefit from this exciting platform for future growth.”
Eventually, LATAM will leave oneworld as well, but it’s not been determined when or whether it would join SkyTeam, the alliance in which Delta is a major partner.
Foreign control of business isn’t allowed under current rules, but minority stakes have been a way for airlines to open themselves up to other markets. The Chilean airline joins the long list of international carriers Delta already owns stakes in, including Aeroméxico, Air France/KLM, Korean Airlines and Virgin Atlantic.
LATAM is the largest carrier in South America, with branches in Argentina, Brazil, Chile, Colombia, Ecuador, Paraguay and Peru. However, only three of them have open-skies agreements with the United States: Chile, Colombia and Peru. Brazil also will become a focus market in the joint venture between the two airlines.
Delta already partners with several airlines that are not part of SkyTeam, Virgin Australia, Virgin Atlantic, WestJet. It has a 9% stake in GOL, but presumably that relationship will end with the new relationship with LATAM. It had numerous codeshares with Jet Airways of India prior to the demise of that carrier. Delta recognizes that true joint ventures are far more important to the bottom line than these alliances of theoretically competing carriers. Right now, the JV partners AF, KL, VS, AZ, VA, and AS are partners, not competitors.
Kiowavt - AA isn't leaving LATAM, it's the other way around
Nooooo. I am an AA ExPlat and we loved our recent trips on LATAM. AA had things to learn from them, not leave them. Great service on and off the plane, good pricing on our trip. Great lounges. Sad I am.