Just a few hours ago, on September 26, 2019 (USA time), it was announced that Delta would be taking a 20% stake in the South American carrier LATAM, and establish a strategic partnership with the airline. LATAM will leave oneworld over a period of time as they figure out the contractual obligations. Here are all the details about this Delta buys LATAM stake.
Delta will be spending USD 1.9 Billion to acquire a 20% stake in LATAM at USD 16 per share. Then, Delta will spend another USD 350 million to support the establishment of a strategic alliance between the two airlines. As a part of the deal, Delta is also going to take over 4 A350 aircraft from LATAM, and the commitment of LATAM towards buying 10 A350 aircraft which are to be delivered between 2020 and 2025. That is 14 A350 aircraft in the bag for Delta which has a big focus on their fleet enhancement at the moment.
Delta and LATAM intend to form a joint venture, giving Delta a large advantage in South America. Delta has never been strong in their own backyard in this way.
LATAM is a big force in South America, created by a merger between Chile’s LAN and Brazil’s TAM that closed in 2012. TAM was in Star Alliance and LAN was in oneworld before this merger.
LATAM will leave oneworld
LATAM, prior to this move, has been trying to make a joint venture with American Airlines, however, they have not been able to get regulatory approval for this for a while now. LATAM has been friends with American for a long time now, and they work closely. However, the Chilean Supreme Court ruled against their JV.
So, this is quite the move to head to Delta. LATAM will also leave the oneworld alliance as a part of this deal. American Airlines, however, continues to be the largest US carrier to Latin America and South America at the moment.
Interestingly, Qatar Airways, another oneworld member, already holds a 10% stake in LATAM, and Delta and Qatar Airways don’t see eye to eye. But in terms of co-owning a share of a good business, they might decide to align nevertheless or mind their own business. Will Qatar continue to lease A350s from LATAM though? We don’t know yet.
But does this mean that LATAM is heading to SkyTeam? Not immediately. Delta is focussing on building its own equity partnerships now, and this tie-up with LATAM does not automatically mean they are heading to SkyTeam too.
With this, Delta continues to build on a network of investments they have been building over the year, trading equity for sway and a network of their own. Virgin Atlantic, Korean Air, Virgin Australia and AeroMexico all bear testimony to this fact.
What do you make of this new airline partnership in the Americas?
Damn it! I’m in the process of planing an entire South America trip with AA and Latam flights booked using Avios. With LATAM leaving Oneworld, my plan of using Avios points for Santiago – Easter Island flight goes out of the window. Its the only airline flying that route and is only 12500 Avios points (plus some surchage) aganist a INR 55K flight. 🙁 Oh well, back to the drawing board.