Earlier today, Delta announced that they be investing $1.9 billion for a 20% stake in LATAM through a public tender offer at $16 per share. In addition, Delta will also invest $350 million to support the establishment of the strategic partnership.
“This trans-formative partnership with LATAM will bring together our leading global brands, enabling us to provide the very best service and reliability for travellers to, from and throughout the Americas. Our people, customers, owners and communities will all benefit from this exciting platform for future growth.”Ed Bastian, Delta’s Chief Executive Officer
“This alliance with Delta strengthens our company and enhances our leadership in Latin America by providing the best connectivity through our highly complementary route networks. We look forward to working alongside one of the world’s best airlines to enhance the travel experience for our passengers.”Enrique Cueto Plaza, Chief Executive Officer of LATAM
Delta expects to exit their stake in Brazilian carrier Gol, which competes with LATAM in the region.
LATAM Leaves OneWorld
The most surprising news came that LATAM would leave the OneWorld alliance. LATAM is not only the largest airline in Latin America, but it is also an important member that supports the route network in the South America region.
American Airlines, which is the largest U.S. carrier to both Latin and South America, at one point had planned to establish a joint venture with LATAM. Obviously this will now not be happening.
American Airlines issued an overall dismissive statement, given the bad news.
LATAM and the Cueto family have been terrific partners of American Airlines for decades. Given the recent negative ruling by the Chilean Supreme Court, which would have significantly reduced the benefits of our partnership since Chile was not approved as a part of the potential joint business arrangement, we understand LATAM’s decision to partner with a U.S. carrier that isn’t burdened by the ruling. Further, this change in partnership is not expected to have a significant financial impact to American, as the current relationship provided less than $20 million of incremental revenue to American, and the proposed joint business without Chile would have provided limited upside. During the transition period, American will work with LATAM to ensure a seamless experience for customers. American Airlines remains the largest U.S. carrier to both Latin and South America and we look forward to competing and growing in this region of the world.American Airlines on LATAM Partnership, FORT WORTH, Texas
Delta Takes LATAM’s Airbus A350s
LATAM has had financial difficulties, which has led to some Airbus A350 orders being deferred. The first few they did not take were given to Hainan Airlines and the later ones that they did take were leased to Qatar Airways.
Now Delta is going to acquire four A350 aircraft from LATAM and has agreed to assume LATAM’s commitment to purchase 10 additional A350 aircraft, to be delivered beginning in 2020 through 2025, supporting Delta’s ongoing fleet transformation.
This move is very clever for Delta as both sides are now happy, as one needs more aircraft and the other cannot take more.
Delta is making a lot of massive movements in its international markets. In the past years they have: invested in China Eastern Airlines to expand China’s market, moved its Asian hub from Tokyo to Seoul to expand its Asian market and vastly increased their volume of European flights, especially from Boston.
For LATAM, it is hard to say at this time whether they will join SkyTeam or not. LATAM has publicly stated that they do not have any immediate plans to join. Delta has also recently voiced its dissatisfaction with its SkyTeam arrangements and are leaning on strategic partnerships to form their own global partner network in the future.
Do you think passengers should consider Delta investing LATAM as good news? What about LATAM leaving oneworld?