A small thunderclap in the skies of international aviation. The carrier Delta Air Lines has announced its intention to acquire a 20% stake in LATAM Airlines Group SA, currently South America's largest airline with 143 destinations from half a dozen countries on the semi-continent. The transaction will cost Delta 1.9 billion dollars, the US carrier's biggest investment since its merger with Northwest more than a decade ago.
This acquisition puts an end to the merger efforts undertaken by American Airlines vis-à-vis LATAM. Both companies are members of oneworld and signed an extensive partnership agreement that also included IAG (British Airways and Iberia).
It was the complex structure of the LATAM holding company that thwarted American's plans. LATAM is present in many markets, with its headquarters in Chile - the company's country of origin - and in Brazil following the acquisition of TAM - but also through subsidiaries in Argentina, Colombia, Ecuador and Peru.
And the joint venture agreement between the four airlines, initially approved by the Chilean antitrust authorities, was finally rejected by the Chilean Supreme Court in May. As a result, American Airlines considered that the future joint venture would have had less impact without Chile. " We understand LATAM's decision to partner with a U.S. carrier unaffected by the Supreme Court's decision. "commented American.
LATAM immediately announced its intention to leaving the oneworld alliance, " in good time and in accordance with formal contractual requirements "according to an official alliance press release. With the planned departure of LATAM, oneworld will be losing an important partner in Latin America and should find it difficult to replace the airline.
The region's other major carrier, Avianca Holdings is expected to sign an extended cooperation agreement with United Airlines, which would also include the Panama-based carrier COPA. As for AeromexicoDelta Air Lines already has a 49% stake in the company.
Delta, the largest US carrier in Latin America
In fact, with LATAM, Delta will become the largest airline shareholder in Latin America. " It's the biggest region in the world where we still had opportunities" said Delta CEO Ed Bastian in an interview. " This agreement completes our presence in the region. "On the other hand, the increase in LATAM's shareholding will result in Delta's exit from the Brazilian airline. GOLin which it holds a 9% stake.
The acquisition of 20% of the capital should take shape in the next one to two years according to Ed Bastian. Delta's CEO is confident that the investment will be approved, as there is virtually no overlap between the two carriers' networks. The partnership would make Delta the largest passenger carrier between the United States and South America.
Initially, LATAM is expected to operate totally independently, without any alliances, but it is likely that once the financial transaction has been fully finalised, it will be able to move rapidly closer to Skyteam...
