Delta Air Lines (DAL) is forming a strategic partnership together with the biggest airline group in South America, LATAM. American Airlines had been trying to form its own joint venture agreement with LATAM as well, due in no small part to the fact that it's a member airline of the OneWorld alliance.
American said Thursday it understood Latam's decision to partner with another us airline.
LATAM Group's CEO, Enrique Cueto, claimed, "This alliance with Delta strengthens our company and enhances our leadership in Latin America by providing the best connectivity through our highly complementary route networks".
The airline said the deal, funded principally through newly issued debt and available cash, would see it invest a further $US350 million to support the establishment of the strategic partnership. Delta will also invest United States dollars 350 Million to support the partnership.
The two can start code-sharing before they receive government, regulatory and anti-trust approval for the larger tie-up, a process Bastian said he expects to take between 12 and 24 months.
The Latin American airline already offers worldwide service between South America and the United States, as well as domestic service in key destinations such as Argentina, Brazil, Chile, Colombia, Ecuador and Peru.
Delta expects that the transaction will be accretive to EPS over the next two years. On September 23, 2019, the American airline acquired a 10% stake in Hanjin-KAL, which is the largest shareholder of Korean Air.
"We are disappointed, but we respect their decision", read a oneworld statement. The $1.9 billion spend brings Delta access to the Chilean-based carrier's service between major cities in South America and the USA, as well as domestic service within Chile, Brazil, Colombia, Peru, Argentina and Ecuador.
Delta Air Lines is ready to invest in the rescue of Italian flagship carrier Alitalia but still believes that a 10% stake is the right level of investment, Chief Executive Ed Bastian told Reuters on Thursday. Delta is planning to exit from its GOL stake, CNBC reported.
Lan Chile (part of what is now known at the LATAM Airlines Group) became a Oneworld member in 2000, and the merged LATAM group confirmed it would join the alliance in 2014.
The new LATAM deal will disrupt a partnership Delta has with Brazilian carrier GOL.
This surprise agreement is just another instance of how Delta has been focused on expanding aggressively in global markets, primarily through joint ventures or minority stakes.
In Europe, the partnership with British Airways will switch sides to LATAM. It also means the transfer of LATAM's Airbus A350s to Delta. -South America traffic flow.
American, who has been in partnership with LATAM for decades, said that during the transition period, it will work with LATAM to ensure a smooth experience for its clients.