Delta Buys A 20% Stake In LATAM; LATAM To Exit Oneworld

What. The. HECK.

Absolutely did NOT see this coming.

  • Delta will invest $1.9 billion for a 20 percent stake in LATAM through a public tender offer at $16 per share, to be funded principally with newly issued debt and available cash.
  • Delta will also invest $350 million to support the establishment of the strategic partnership.
  • Delta will acquire four A350 aircraft from LATAM and has agreed to assume LATAM’s commitment to purchase 10 additional A350 aircraft to be delivered beginning in 2020 through 2025, supporting Delta’s ongoing fleet transformation.
  • Delta will be represented on LATAM’s Board of Directors, further strengthening the relationship.
  • The tender offer and the strategic partnership are subject to customary closing conditions and all required governmental and regulatory approvals, including anti-trust immunity.
  • Partnership brings together the leading airlines in North America and Latin America, connecting the Americas to the world as never before.
  • Together, Delta and LATAM will hold the leading position in five of the top six Latin American markets from the U.S.
  • Together, the partners will serve 435 destinations worldwide and carry more passengers between North America and Latin America than any other partnership.
  • Customers will benefit from significantly expanded travel choices across the Americas and an industry leading customer experience.

Additionally, per CNBC, LATAM will be leaving the OneWorld alliance, but it was not immediately clear whether it would join SkyTeam, the group that includes Delta and its partners.

Delta will also provide LATAM an additional $350 million to help it transition out of Oneworld and plug into Delta’s network.

American Airlines and LATAM filed for a joint venture in April… I’m assuming this is the end of that application.

American Airlines’ Statement Regarding The New DL/LATAM Partnership:

LATAM and the Cueto family have been terrific partners of American Airlines for decades. Given the recent negative ruling by the Chilean Supreme Court, which would have significantly reduced the benefits of our partnership since Chile was not approved as a part of the potential joint business arrangement, we understand LATAM’s decision to partner with a U.S. carrier that isn’t burdened by the ruling. Further, this change in partnership is not expected to have a significant financial impact to American, as the current relationship provided less than $20 million of incremental revenue to American, and the proposed joint business without Chile would have provided limited upside. During the transition period, American will work with LATAM to ensure a seamless experience for customers. American Airlines remains the largest U.S. carrier to both Latin and South America and we look forward to competing and growing in this region of the world.

A bit of self-promo, but here’s my video summation of the news:

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Looks like the DLVA hub captains have some work to do. exciting news

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WOW, THIS IS HUGE! I always hoped for something like this, hopefully they will get into SkyTeam maybe!

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No I love Oneworld and the LATAM Oneworld livery image.

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Yoooo! Imagine LATAM in SkyTeam… South American dominance!

Can’t wait for more news. Exciting things happening!

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I’m shocked by this, I don’t have other words.

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Shocked positive or negative?

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Woah. That really is something.

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A little bit of both, I’m just surprised.

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It’s getting good.

American Airlines’ Statement Regarding The New DL/LATAM Partnership:

LATAM and the Cueto family have been terrific partners of American Airlines for decades. Given the recent negative ruling by the Chilean Supreme Court, which would have significantly reduced the benefits of our partnership since Chile was not approved as a part of the potential joint business arrangement, we understand LATAM’s decision to partner with a U.S. carrier that isn’t burdened by the ruling. Further, this change in partnership is not expected to have a significant financial impact to American, as the current relationship provided less than $20 million of incremental revenue to American, and the proposed joint business without Chile would have provided limited upside. During the transition period, American will work with LATAM to ensure a seamless experience for customers. American Airlines remains the largest U.S. carrier to both Latin and South America and we look forward to competing and growing in this region of the world.

So… I guess leaving OW isn’t too big on them?

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Dang sky team has been making moves. First Virgin Atlantic (not SkyTeam but joint venture with SkyTeam members) now this

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Holy crap.

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American and LATAM have been partners for quite a while and seeing this transition is a bit upsetting for me. I flew on the Oneworld livery back in 2018 and knowing that LATAM will no longer be part of it breaks my heart a little. I’m wondering what will happen afterward. LATAM occupies terminal 8 at JFK with all the Oneworld carriers. Back then they used to operate from T4. Maybe they will switch back since Delta operates there. Who knows?

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My opinion in this:

I’ve got this theory that SkyTeam will end. Alliances are becoming irrelevant as more airlines are partnering with specific airlines rather than the airlines in the alliance… (China Southern as an example, left SkyTeam to partner with American, BA, Emirates, Finnair, Qatar, etc.)

There’s an article earlier quoting Delta CEO Ed Bastian that “SkyTeam has failed”.

This seems like the first step into that…

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Official Oneworld Press Release:

https://www.oneworld.com/news/2019-09-26-oneworld-statement-on-LATAM

LATAM advised oneworld earlier today of their decision to partner with an airline outside of the oneworld alliance. LATAM further advised oneworld that they intend to leave the alliance in due course and in accordance with formal contractual requirements. We are disappointed, but we respect their decision. They have been a valued long-term member of the alliance, and we wish them well. Our priority at this time is to our customers and while LATAM remains a member of oneworld, the full customer benefits will continue to be delivered. As the transition continues, we will work to ensure a seamless experience for our customers. oneworld remains a strong coalition of high-quality airlines. There has been significant progress in member airlines deepening their bilateral relationships, as evidenced by the recent regulatory approval of the American Airlines and Qantas joint business.

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Also, according the WSJ, Delta will sell it’s shares are remove its partnership with GOL

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An interview with AA CEO Doug Parker: https://www.dallasnews.com/business/airlines/2019/10/06/american-airlines-ceo-doug-parker-return-max-falling-stock-price-rehabbing-companys-image/

How surprised were you by Delta’s deal to buy a 20% share of LATAM Airlines, which you were trying to build a joint venture with?

We had been having trouble with LATAM and the joint venture agreement from the moment that the Chilean government did not approve of it. That was a huge step back in our ability to become a venture partner. To say we were surprised that LATAM went somewhere else, it was not a surprise.
But I don’t want to pretend I knew it was coming. The call that I got from [LATAM CEO] Enrique Cueto was not one that we thought was going to happen.
From my perspective, the best partner for them was American Airlines. Delta’s network is not nearly as robust as ours is in that part of the world. So we’ll see if it gets approved.

H m m

LATAM will exit Oneworld on October 1, 2020:

https://www.qantas.com/au/en/frequent-flyer/earning-points/flights/latam.html

LATAM has given notice that they will exit one world on 1 October 2020. Until this date passengers will continue to receive the one world benefits associated with LATAM’s membership.

I really think this is a negative for them in the long run. They heavily rely on American’s Miami hub to easily transfer passengers because of it’s location and the city’s demographics. But we’ll see how this goes. I think Oneworld is probably gonna look to pick up another airline from the region now, maybe GOL or Azul if they can’t get an airline already in an alliance like Avianca or Aerolinas Argentinas

Delta completed the purchase of the stake yesterday.

https://blueswandaily.com/delta-completes-acquisition-of-20-stake-in-latam/