Delta Airlines stockholders are smiling. Their shares just jumped 31 percent at the news that Delta was acquiring a 20 percent stake in LATAM Airlines. The $1.9 billion spend brings Delta access to the Chilean-based carrier’s service between major cities in South America and the U.S., as well as domestic service within Chile, Brazil, Colombia, Peru, Argentina and Ecuador. It also means the transfer of LATAM’s Airbus A350s to Delta. LATAM has 25 A350’s on order, twelve have been delivered, and seven are operational. Delta has 25 Airbus A350-900s ordered, with more than half delivered and operational.
LATAM was formed in 2012 when Chile-based LAN and Brazilian airline TAM were merged.
“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,” said Ed Bastian, Delta’s CEO. “Our people, customers, owners and communities will all benefit from this exciting platform for future growth.”
While Delta is gloating over the action, American Airlines is not. The carrier has been in hot pursuit of a joint venture with LATAM, buoyed by a mutual connection through the OneWorld alliance of airlines. But LATAM will now be leaving the OneWorld alliance, although it is not clear whether it will be joining SkyTeam, where Delta has its alliances.
“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,” noted American Airlines in a press release.
In recent years, Delta has attentively expanded its ownership and relationship with other international carriers, raising its stake in the parent company of Korean Air to 9.2 percent, entering a trans-border venture with WestJet and increasing its ownership of Aeromexico to 49 percent. Delta dropped its stake in the airline Gol Linhas in favor of LATAM.
“This is the biggest region of the world that we had an open space,” Bastian told the Wall Street Journal in an interview. “This largely completes the map.”
The new partnership ends the three-year effort by American Airlines to deepen their relationship with Latam. Chilean antitrust regulators initially approved joint business agreements between Latam, American and the parent company of British Airways and Iberia, but the Chile’s Supreme Court rejected the arrangement in May creating a severe loss of advantages in such an alliance for American. With Delta Air Lines the partnership will take leading positions in five of the top six Latin American markets from the U.S.