Delta Air Lines is investing in another large airline as their global empire continues to expand and Delta grabs a seat on another board. Now, Delta’s sphere of influence continues far beyond SkyTeam to include a current OneWorld member. Delta today announced a new partnership and investment in Latin America’s largest airline, LATAM. After an American Airlines and LATAM joint venture was denied by Chile, Delta swooped in and decided to gobble up 20% of LATAM.
Delta Invests in LATAM
The plan announced today includes Delta Air Lines buying a 20% stake in LATAM worth 1.9 billion dollars. As Delta will control 20% of the company the airline will also be represented on LATAM’s board. This will allow Delta to expand and partner closely with LATAM and help guide the airline in their strategy. This includes new routes, partnerships, onboard offering and more.
Delta has already announced the following investments in LATAM:
- Delta will invest $1.9 billion for a 20 percent stake in LATAM through a public tender offer at $16 per share, to be funded principally with newly issued debt and available cash.
- Invest $350 million to support the establishment of the strategic partnership.
- Delta will 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.
- Delta will be represented on LATAM’s Board of Directors, further strengthening the relationship.
- The tender offer and the strategic partnership are subject to customary closing conditions and all required governmental and regulatory approvals, including anti-trust immunity.
Currently, Delta owns a 9% stake in Brazilian Airline GOL, but Delta has also said they will divest. The codeshare partnership with GOL is also expected to end as Delta will expand a strategic partnership with LATAM.
Delta Is Creating a Worldwide Empire
Delta Air Lines is creating their own airline empire where their sphere of influence extends across the globe and far beyond the United States. By investing is airlines around the world, Delta’s reach is now greater than ever. Delta currently owns part of the following airlines:
- 49% of Aeromexico + Board Seat + Joint Venture
- 49% of Virgin Atlantic + Board Seat + Joint Venture
- 20% of LATAM (pending)
- 10% of Korean Air + Joint Venture
- 10% of Air France- KLM + Board Seat +Joint Venture
- 9% of GOL – to be liquidated
- 55% China Eastern + Board observer
- Joint Venture with WestJet
- Joint Venture with Virgin Australia
LATAM to Leave OneWorld
Delta Air Lines is currently a member of the Skyteam Alliance. Nearly every airline Delta owns a stake in is either part of the Skyteam or are independent carriers. When TAM and LAN merged to become LATAM, TAM left the Star Alliance to join LAN in OneWorld. It’s now being reported by CNBC that LATAM will leave the OneWorld alliance. It is not clear if they will join Skyteam, or remain unaligned like Delta partner Virgin Atlantic. There has been no official announcement from LATAM.
If history plays out, and as we all know history tends to repeat itself, LATAM will also likely end their partnership with Alaska Airlines. Delta Air Lines has been trying to squeeze Alaska Airlines in the United States out of major markets and has grown a hub in Seattle, Alaska’s largest hub. In the last several years we’ve seen Delta make investments in Aeromexico, KLM, and Air France. With each investment, Delta has convinced the airlines to end their partnership with Alaska.
Expect a major shakeup in alliances and airline partnerships. Airline alliances are in flux. Even China Southern, the first Chinese carrier to join Skyteam, recently left. This was partly due to Delta Air Lines and their investment in China Eastern.
Not Done Yet
Today’s announcement is shocking and will change the travel game to South America. LATAM and Aeromexico already have a codeshare partnership and I would imagine this will deepen through Delta’s investment. Delta is calling this a …”transformative partnership [together] with LATAM [we] 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…”
The new partnership will mean Delta and LATAM will hold the leading position in five of the six biggest travel markets to Latin America. All except Miami. If Chile didn’t like the American Airlines-LATAM joint venture, they may also reject this investment and partnership.