Note: if you have tickets on any of the affected airlines in the coming weeks and months, sit tight for now, these things will take a while to finalize
Delta just announced the purchase of a 20% stake in LATAM, South America’s largest carrier. Per CNBC, LATAM will be leaving the oneworld alliance and joining Skyteam at a future date.
What a move for Delta
This is a masterstroke. Delta found a market they could swipe up for a relatively small amount of money ($1.9 billion). They also committed to buying some jets from LATAM and taking over some A350 orders, but to basically conquer a rival and make a big claim to an entire continent of business for less than $2 billion just doesn’t happen that often. Despite Delta CEO Ed Bastion recently decrying the Skyteam alliance, Delta bringing LATAM into the fold will be (in my opinion) a positive development for AeroMexico, and Delta divesting their stake in GOL will bring a more premium airline into the alliance. It’s just a great move, so bravo to Delta. Delta and LATAM will now dominate 5 of the 6 largest markets in South America.
Delta and LATAM issued the requisite statements:
“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.”
Why I’m shocked by this news
American Airlines had been trying to work out an antitrust immunity agreement with LATAM for years. LATAM was a critical component of American’s South American strategy and the Oneworld relationship, in my opinion, was critical for American. American has an incredibly strong presence in Central and South America, and that presence was buttressed by onward connections deeper into the region via LATAM.
One can’t help but wonder what the impact will be to American’s South American presence.
American has issued the following statement:
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.
To summarize: due to the Chilean Supreme Court ruling against LATAM Chile and American tying the knot in a joint business venture, there was really only one way to go for LATAM.
I know they tried to paint it in a positive light, but this has to hurt. Can’t help but wonder what American’s next move will be, maybe they’ll make a run at GOL?
This is breaking news, so stay tuned for more developments.