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C & # 39; huge new.
Delta buys 20% stake in Latin America
It was announced today that Delta to invest $ 1.9 billion to acquire 20% stake in LATAM. This is done through a public tender offer of $ 16 per share, to be financed primarily with new debt issued and cash available.
In addition, Delta will invest $ 350 million to support the development of a strategic partnership.
It's the biggest acquisition of Delta since Northwest's takeover more than a decade ago.
Ed Bastian, CEO of Delta, said the following:
"This transformative partnership with LATAM will bring together our leading global brands, enabling us to provide the best service and most reliable reliability for travelers to, from and across America. Our staff, customers, owners and communities will all benefit from this exciting platform for future growth. "
In the meantime, LATAM CEO Enrique Cueto Plaza said:
"This alliance with Delta strengthens our company and strengthens our leadership in Latin America by providing the best possible connectivity through our highly complementary route networks. We are looking forward to working with one of the best airlines in the world to enhance the travel experience of our passengers. "
An interesting (although ultimately insignificant) point is that Qatar Airways also holds a 10% stake in LATAM. Delta and Qatar Airways are enemies, so it's pretty funny, but I imagine they could coexist as investors, assuming the ego does not interfere.
Delta buys 20% stake in LATAM
Delta will have more than A350
As part of this investment, Delta will purchase four A350s from LATAM and has agreed to assume LATAM's commitment to acquire an additional 10 A350s, which are expected to be delivered between 2020 and 2025, to support the transformation of Delta's fleet. .
It means that Delta receives 14 additional Airbus A350s.
Delta A350 Business Class
Delta and LATAM to form joint venture
Delta and LATAM plan to form a joint venture This will give Delta a significant advantage in South America, a region in which they have always been weak:
- Delta and LATAM will rank first in five of the six major Latin American markets from the United States.
- Together, the two companies will serve 435 destinations worldwide and will carry more passengers between North America and Latin America than any other partnership.
This will make Delta strong in Latin America
LATAM will leave Oneworld and reduce its ties with the American
What makes all this so crazy is that American and LATAM are actively looking for a joint venture, but have encountered regulatory difficulties in approving it.
So, to see LATAM cancel this action and rather pursue something with Delta, despite their longstanding partnership with American, it's just … wow.
LATAM plans to leave the oneworld alliance, which is a blow.
C & # 39; horrible news for American. Historically, Latin America is the market on which they have had the biggest advantage, but they will lose it completely with this deal.
American has now issued the following statement on this topic:
Given the recent negative decision of the Chilean Supreme Court, which would have greatly reduced the benefits of our partnership, as Chile has not been approved in the context of a possible joint trade agreement, we understand the decision of LATAM to associate with a US carrier that is not charged by the decision. In addition, this change of partnership is not expected to have a significant financial impact on American, as the current relationship generated less than $ 20 million in additional revenue for American, and the proposed joint activity without Chile would have provided a potential for growth. limited increase. During the transition period, American will work with LATAM to provide customers with a seamless experience. American Airlines remains the largest US carrier in Latin America and South America and we look forward to competing and expanding in this region of the world.
It's a terrible news for oneworld
Will LATAM join SkyTeam?
We do not know yet if LATAM will join SkyTeam. Delta expressed dissatisfaction with SkyTeam, which is building its own global network of airlines outside the alliance. So I do not think LATAM will join SkyTeam, because most of Delta's closest partnerships are focused on equity investments and joint ventures, rather than a shared alliance.
Does LATAM & Alaska Cut Ties?
Although minor in the grand scheme of things, it should be noted that Alaska and LATAM have a partnership. Although Alaskan partnerships cover alliances, there is precedent: when Delta invests in airlines and forms close partnerships, these airlines cut ties with Alaska.
So, even if nothing has been said in one way or another, I guess Alaska and LATAM will cut ties in the not-too-distant future.
Will Alaska and LATAM cut ties?
This is a brilliant step forward from Delta
It can not be denied that Delta has a brilliant and consistent strategy. The airline is building its own global network of airlines, through partnerships and strategic investments. This gives them so much control globally that no other American airline has yet.
That's what they did with Aeromexico in Mexico, Virgin Australia in Australia, Virgin Atlantic in Europe, Korean Air in Asia, and so on.
Delta also took a stake in Korean Air
Latin America is historically a market in which Delta was the weakest, with little potential for growth. It is therefore very brilliant to see them not only strengthen in this way, but also essentially destroy the market of one of their competitors.
As a oneworld loyalist, it's a shame.
Bottom line
Delta is investing nearly $ 2 billion to acquire a 20% stake in LATAM. In doing so, they are also acquiring an additional 14 A350s that were to be transferred to LATAM.
Delta and LATAM will also form a huge joint venture, which means that LATAM will leave oneworld and break its ties with American. This is catastrophic news for the Americans, because it means that they will no longer dominate in the only region where they once had a stronghold.
What do you think of the new Delta & LATAM association?
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