On September 26, Delta and LATAM Airlines Group S.A. (LATAM) have announced that they have entered into a strategic partnership that combines, for the first time, the strengths of the leading airlines in North and Latin America. Delta expects to exit its 9% stake in Brazilian carrier Gol, which competes with LATAM in Brazil. Regulators in the U.S. and Chile would have to approve the Delta stake.
The announcement doesn’t bode well for Delta rival American Airlines, also a member of oneworld. which had pursued a joint-venture with the Chilean-based carrier to grow revenue in the region. LATAM has announced it will be leaving oneworld alliance, but it is not yet clear whether it would join SkyTeam, where Delta is a member. Delta expects that the transaction will finalized over the next two years.
Delta Air Lines on the new partnership
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. With their complementary networks, Delta, LATAM and their partners will be able to offer access to a greatly expanded array of worldwide destinations. Together, the partnership will provide greater customer convenience, a more seamless travel experience and better connect customers with the rest of the world.
Additional details of the partnership include:
• Delta will invest $1.9 billion for a 20 percent stake in LATAM through a public tender offer at $16 per share, to be funded principally with newly issued debt and available cash.
• Delta will also invest $350 million to support the establishment of the strategic partnership.
• 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 fleet transformation.
• Delta will be represented on LATAM’s Board of Directors, further strengthening the relationship.
• The tender offer and the strategic partnership are subject to customary closing conditions and all required governmental and regulatory approvals, including anti-trust immunity.
In addition, the transaction will not impact the company’s existing financial commitments to shareholders, including free cash flow and shareholder returns. Delta also expects to remain within targeted leverage ratios. For LATAM, the transaction will improve free 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.
oneworld statement on LATAM
LATAM advised oneworld of their decision to partner with an airline outside of the oneworld alliance. LATAM further advised oneworld that they intend to leave the alliance in due course and in accordance with formal contractual requirements. We are disappointed, but we respect their decision. They have been a valued long-term member of the alliance, and we wish them well. Our priority at this time is to our customers and while LATAM remains a member of oneworld, the full customer benefits will continue to be delivered. As the transition continues, we will work to ensure a seamless experience for our customers.
American Airlines on LATAM partnership
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.
GONE SHOPPING / Delta is expanding its presence in Latin America by spending $1.9 billion for a 20% stake in LATAM,…
Publicată de Aeronews pe Joi, 26 septembrie 2019