Delta buys major share of Latam, expanding its South American presence

Delta Air Lines said on Thursday it is buying a 20% stake in Latam Airlines Group for $1.9 billion, creating a major new airline partnership and ending the Chilean carrier’s ties with American Airlines.

The Latam – Delta partnership could increase the number of flights between South America and the U.S.

The surprise deal with Latin America’s largest carrier will give Delta a much bigger footprint in the region, a key growth market in which Latam flies to dozens of destinations including cities in Argentina, Peru, Ecuador and Brazil.

The Latam deal is Delta’s largest since it merged with Northwest Airlines a decade ago.

American Airlines Group Inc., which has long been the leading U.S. carrier in the region and was pursuing a deeper route alliance with Latam, said the loss of its Chilean partner would not have a significant impact on its financial results.

American added that its Latam partnership had limited upside after the Chilean Supreme Court struck down the two carriers’ plans for further route cooperation that would have also involved Oneworld Alliance members British Airways and Iberia.

“This is a body blow for American, but not a lethal body blow. It means that Delta will have more access to Latin America than it did before, but American already has much of that in its back pocket,” independent aviation analyst Mike Boyd said.

Following its tie-up with Delta, Latam will exit Oneworld and pursue route options with Delta and its partner Grupo Aeromexico, which belong to the rival SkyTeam alliance. It has not, however, decided whether to officially join SkyTeam.

Oneworld said Latam had advised it would leave the alliance in “due course” in line with contractual requirements, without naming a specific date.

Airlines increasingly have bilateral codeshare arrangements outside major alliances. Qantas Airways Ltd, a Oneworld member, said it would retain its codeshare partnership with Latam despite the Chilean carrier’s departure from the alliance.
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Credit: Reuters, www.reuters.com