Delta will make a $1.9 billion investment in LATAM.
The move is both bold and surprising given LATAM’s long-running partnership with Delta’s U.S. rival, American Airlines. Both carriers have been in the Oneworld alliance since 2000. However, the Chilean Supreme Court struck down a proposed joint venture agreement that would have meant more cooperation and route development between LATAM and partners like American Airlines, British Airways and Iberia in May.
As part of its announcement, Delta has said it will also invest $350 million to “support the establishment of a strategic partnership,” which likely spells LATAM’s exit from Oneworld. For its part, Delta has an approximately 10% equity stake in LATAM’s Brazillian competitor, GOL, which it will probably divest.
Delta also announced that it will acquire four Airbus A350 aircraft from LATAM and has agreed to assume LATAM’s purchase commitment of 10 additional A350s to be delivered from 2020-2025.
“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 Ed Bastian, Delta’s Chief Executive Officer. “Our people, customers, owners and communities will all benefit from this exciting platform for future growth.”
“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,” said Enrique Cueto Plaza, Chief Executive Officer of LATAM. “We look forward to working alongside one of the world’s best airlines to enhance the travel experience for our passengers.”
Delta is paying for the investment through a public tender offer of $16 per share funded with newly issued debt and available cash. The infusion is expected to improve LATAM’s cash flow and reduce its projected debt by over $2 billion by 2025.
Currently, LATAM flies to 143 destinations in 25 countries, and operates 1,300 flights per day, carrying 71 million passengers per year. For its part, Delta flies nearly 200 million people per year to over 300 destinations in more than 50 countries. Together, the two airlines expect to serve 435 destinations worldwide and hold the leading position in five of the top six Latin American markets from the U.S.