Delta Air Lines says passengers will benefit from “significantly expanded travel options” as a result of its $US1.9 billion deal to take a 20 percent stake in Latin America’s LATAM.
The regional shake-up will give Delta and code-share partner LATAM the leading position in five of the top six Latin American markets and will see them together serve 435 destinations worldwide.
The move, which is still subject to some government approvals, continues Delta’s strategy of expanding internationally through joint ventures and minority stakes in other carriers.
Recent examples include a decision by Delta to raise its stake in Korean Air and a trans-border joint venture with Canada’s WestJet.
READ: Delta expands global strategy with a stake in Korean Air.
Other Delta equity investments include stakes in Aeromexico. Air France-KLM, China Eastern and Virgin Atlantic.
LATAM flies to 143 destinations in 25 countries, including Argentina, Brazil, Chile, Colombia, Ecuador and Peru In Latin America.
Operating about 1300 flights a day, it also has international operations in Latin America, Europe, the United States, the Caribbean, Oceania, Africa and Asia.
Delta says it will unlock new growth opportunities building on the global footprint of both airlines and joint ventures worldwide, including the existing partnership with AeroMexico.
“This transformative partnership with LATAM 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,” said Delta CEO Ed Bastian
“Our people, customers, owners and communities will all benefit from this exciting platform for future growth.”
LATAM chief executive Enrique Cueto Plaza added: “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.
“We look forward to working alongside one of the world’s best airlines to enhance the travel experience for our passengers.”
The Delta move comes after a failed attempt by rival American Airlines to set up a joint-venture with LATAM, which is a member of the oneworld alliance.
The new deal would suggest the Latin American airline group would join Delta in SkyTeam but that has yet to be confirmed.
Delta’s $US1.9 billion investment will be through a public tender offer at $US16 per share.
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.
It would also acquire four Airbus A350 aircraft from LATAM and assume the Latin American group’s commitment to buy 10 additional A350s to be delivered between 2020 and 2025.
The US carrier expects the deal to boost earnings per share over the next two years and says it will not affect the company’s existing financial commitments to shareholders, including free cash flow and shareholder returns. It also expects to remain within targeted leverage ratios.
LATAM said the partnership would see improved free cash flow, a $US2.5 billion reduction in forecast debt by 2025 and an improved capital structure.
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