Delta LATAM investment: the 7 losers

Yesterday, I wrote about the really shocking development that Delta would buy back a stake in LATAM, which would sever ties with American and oneworld. All of this was happening while American and LATAM were pursuing a joint venture even though they were struggling to get regulatory approval in Chile.

The extent to which this left the left field can not be underestimated, and to what extent this largely transforms the global airline industry.

In this post, I wanted to take a closer look at who the "losers" are in this situation:

American

It seems that American has been caught off guard. The airline tries to minimize the seriousness of what happened. American says they understand LATAM's decision and that their current relationship has earned them less than $ 20 million in additional revenue. This is probably technically true, even if it does not quite show how bad this decision will be for them.

It is true that American and LATAM were having trouble getting their joint venture approved, and they would have had so many restrictions that they would have been worth nothing.

The actual loss here does not come in the form of additional revenue loss, but rather from the US airline and oneworld, which is moving from the dominant airline and alliance in the region, to become a distant second place:

• American has generally reduced its operations in South America, particularly in secondary markets
• American finds himself without a partner airline in South America, which leaves him little connection possibilities beyond his main hubs
• It is true that Miami is the main gateway to South America and that America is still strong there, but keep in mind that LATAM also offers flights to 10 destinations from Miami. So they can compete in a lot of ways.

It will be very interesting to see how American equities will behave. I am curious to know whether they are largely trading in Latin America, or whether they are stepping up their operations and trying to compete with the Delta & LATAM partnership.

The fact is that Americans could actually be very competitive, since they have Miami as the key gateway. But the question is whether Latin America is a lucrative market for them or if US management may be forced to wake up and take action.

One world

LATAM leaves Oneworld and it's a huge loss for the alliance. Although oneworld has impressive airlines and great recognition for elite members, oneworld will have a huge hole in their network.

In Latin America, Star Alliance has Avianca and Copa, while SkyTeam, at least, has Aerolineas Argentinas. Oneworld will have nothing.

SkyTeam

It may sound surprising, but I think SkyTeam is also losing with it. While LATAM leaves Oneworld, there is no indication that they are joining SkyTeam, which is bad news for SkyTeam.

Delta management has increasingly talked about the lack of value in SkyTeam.

As Delta continues to build its own global network of airlines without joining SkyTeam, the value of the alliance is shrinking more and more.

Gol

A few years ago, Delta took a stake in the partnership with the Brazilian company Gol. It was an attempt by Delta to get some sort of presence in Brazil, although it's obviously not the ideal partner if you're trying to build a global alliance.

It was announced that Delta would abandon its stake in Gol. We can therefore expect that this partnership will also end.

Alaska

Alaska has a global network of partner airlines that have been collaborating with LATAM for years. It has been great to be able to earn and redeem miles of the Alaska mileage plan for trips to Latin America.

Although nothing has been officially announced, I would bet that Delta will force LATAM to cut ties with Alaska.

Delta and Alaska are somehow enemies at this stage (they were once formidable enemies), given the ferocity with which they clashed in Seattle. The precedent has been that when Delta gets closer to the airlines, they magically cut off their ties with Alaska.

Informed consumers

I do not mean to say that consumers are generally losing out because of this new partnership, although I think it's fair to say that savvy consumers will lose.

In many ways, American and LATAM were exactly where I wanted them. I was happy that their joint venture was not approved because it involved increased competition in the market.

But for savvy consumers, I finally think that LATAM was better where they are now than where they will be:

• LATAM is currently in a global alliance, which means that people around the world can easily earn and redeem miles on them.
• Global alliances offer many consumer benefits, such as salon access, priority registration, and more.

Although Delta will definitely offer mutual benefits:

• They will probably not have nearly as many global partners
• Delta often limits the benefits to specific circumstances / ticket types (in other words, despite Delta's huge investment in both airlines, I doubt Virgin Atlantic's elite members will have access to LATAM lounges if perform domestic flights).

Qatar Airways

There are not really any practical implications here, but it's still remarkable. Qatar Airways holds a 10% stake in LATAM. Delta and Qatar Airways hate each other. Qatar Airways CEO Akbar Al Baker keeps talking about Delta, their "granny" flight attendants and their "sh! T ".

As for selfishness, I can not imagine that Al Baker is very happy that his friends in Atlanta have just bought a larger share of the airline than Qatar. I would be shocked if Al Baker would not empty his piggy bank today to find out if he can buy more, because he does not want to be second behind anything compared to Mr. Bastian.

Bottom line

Delta's investment in LATAM is perhaps the most important information on airline acquisitions in the United States since the wave of mergers observed between US airlines (which began with Delta & Northwest and has come to an end with Alaska and Virgin America).

It's huge in many ways – in terms of the amount spent, implications for global alliances, and in the sense that Delta literally flew LATAM to the US and oneworld, and is throwing Gol through the side of the road.

What is your opinion on the losers of Delta's investment in LATAM?