Delta announced last week it would purchase a 20% stake in LATAM Airlines, Latin America’s largest carrier, to form a powerful new airline partnership in what will be Delta’s largest deal since its merger with Northwest Airlines more than a decade ago.
The $1.9 billion deal will give Delta a much bigger foothold in the region, representing a key growth market. LATAM flies to dozens of destinations, including cities in Argentina, Peru, and Brazil.
"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."
The new airline partnership will also end the Chilean carrier’s ties with American Airlines, which has long been the leading U.S. carrier in the region.
“This is a body blow for American, but not a lethal body blow. It means that Delta will have more access to Latin America than it did before, but American already has much of that in its back pocket,” independent aviation analyst Mike Boyd said to Reuters.
As part of the deal, 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 mission to transform and update its fleet.
For LATAM, the transaction will improve cash flow generation; reduce forecasted debt by over $2 billion by 2025; and improve LATAM's capital structure, enhancing its ability to execute its long-term strategy.
"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."
The strategic partnership will unlock new growth opportunities, building upon Delta's and LATAM's global footprint and joint ventures worldwide, including Delta's existing partnership with Aeroméxico. Through their complementary networks, Delta, LATAM and their partners will be able to offer access to an even wider variety of destinations worldwide.