Delta to acquire 20 percent stake in LATAM

LATAM will transfer parts of its Airbus A350 fleet to Delta. Photo: © TJDarmstadt

Delta Air Lines has announced that it will acquire a 20 percent stake in LATAM Airlines Group, marking the start of a new airline partnership.

This purchase is valued at US $1.9 billion, with a public tender offer at US $16 per share. Delta says it is also investing an additional US $350 million, to “support the establishment of the strategic partnership“.

Delta, the second largest airline in the world by passengers carried, states it would finance this major investment into Latin America’s largest airline group by assuming new debt and using available cash. The deal, and everything connected to the partnership, is subject to government and regulatory approval. Nevertheless, Delta expects the proposal to be approved and transactions to be ready over the coming two years.

The two airlines have issued a joint statement, explaining details of the new partnership. Delta will take presence on LATAM’s board of directors. LATAM Airlines plans to sell four Airbus A350 to its new American partner. A further ten A350 currently ordered by the South American airline would also be taken up by Delta, with deliveries scheduled from 2020 to 2025. This supports Delta’s ongoing long-haul fleet transformation program, which saw the A350-900 and a few months ago also the new A330-900neo enter its operations.

LATAM will leave the Oneworld airline alliance, as its new partner is a founding member of the competing SkyTeam alliance. However, it was not immediately clear whether LATAM would change to Delta’s alliance. The largest Latin American competitor of the carrier, Colombia-based Avianca, is part of the Star Alliance, while Argentinian flag-carrier Aerolineas Argentinas is a member of SkyTeam.

LATAM had a long standing partnership with American Airlines, Iberia and British Airways, including through code share agreements, as well as the Oneworld alliance, of which the three airlines are members.

According to CNBC, American Airlines stated that Delta taking away its partnership with LATAM would have no significant financial effect on its operations. American is the largest airline in the world. Earlier this year, a proposed joint-venture by the carrier with LATAM Airlines was rejected by Chile’s supreme court.

Delta holds stakes in several major airlines around the world. These include Aeromexico with a 49 percent share. The Mexican flag-carrier will likely profit from Delta’s future partnership with LATAM. Across the Atlantic, Delta is cooperating with Air France-KLM and Virgin Atlantic. Following the LATAM investment, the Atlanta-based airline sold off its minority stake in GOL, Brazil’s second largest airline.