BTN updated this story on Sept. 27, 2019, at 1:20 p.m. Eastern with details of Latam's partnerships with other carriers, as well as details on Latam and Delta codesharing.
Delta and Latam have agreed to form a strategic partnership.
As part of the deal, Delta will take a 20 percent stake in Latam and Latam will
exit the Oneworld alliance. The partnership will build upon Delta's
joint venture with Aeromexico and "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," Delta CEO Ed Bastian said.
Latam CEO Enrique Cueto Plaza said the partnership "strengthens our
company and enhances our leadership in Latin America by providing the best
connectivity through our highly complementary route networks."
Delta plans to invest a significant sum, including $1.9
billion to acquire the Latam stake through a public tender offer of $16 per
share and an additional $350 million to help establish the partnership. In
addition, Delta plans to acquire four Airbus A350 aircraft from Latam and to assume
Latam's commitment to buy 10 additional A350s through 2025.
The investment also will get Delta a seat on Latam's board
of directors.
Latam had been establishing
a joint venture with longtime Oneworld partner American Airlines. A
recent ruling by Chile's Supreme Court blocked the JV in Chile even after Chile's
antitrust tribunal had approved it. American stated: "We understand
Latam's decision to partner with a U.S. carrier that isn't burdened by the
ruling. 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 added that the change will not have a large financial
impact on American, as the joint business "without Chile would have
provided limited upside."
A Delta spokesperson confirmed that Latam would exit
Oneworld as part of the agreement, and Latam executives said the company plans
to operate as an independent group rather than join the SkyTeam alliance
alongside Delta and Aeromexico. The agreement with Delta does not have
exclusivity requirements, and Latam can keep its bilateral agreements with
other carriers in Oneworld, said Latam chief commercial officer Roberto Alvo
Milosawlewitsch, who will
take over as CEO next year.
The partnership between Delta and Latam and Delta's
investment require regulatory approvals, including antitrust approvals, which
Delta estimates will take one to two years to obtain. Delta does not anticipate
the challenges there that American faced. "Our networks are complementary
and together are going to generate consumer benefits," Delta EVP and chief
legal officer Peter Carter said. "American and Latam had a number of
overlaps that created issues with the Chilean regulators, and we just don't
have that here." Delta and Latam have only one overlapping route, between
New York and Sao Paolo, Latam CFO Ramiro Diego Alfonsin Balza said.
Codesharing between Delta and Latam, meanwhile, could begin by the
end of this year, Bastian said. Latam executives said codeshare agreements with
American would continue for a few more months to smooth the transition to codesharing
with Delta.
Delta has made
several investments in carriers in the past several years, including
Aeromexico, Air France-KLM, Virgin Atlantic and China Eastern. Brazilian
carrier Gol also had been a part of that investment strategy, but with the
planned Latam investment, a Delta spokesperson said, Delta will "exit our
stake in Gol in an orderly fashion in the coming months."