Delta Air Lines Buys Stake in Latin America’s Latam at American’s Expense – Skift

Delta Air Lines Inc. is dramatically expanding its Latin American footprint, agreeing to a $2.25 billion deal with the region’s largest carrier that upends the designs of U.S. rival American Airlines Group Inc.

The pact calls for Delta to pay $1.9 billion for a 20% stake in Latam Airlines Group SA, the companies said in a statement Thursday. Delta will also invest $350 million in the partnership, money that is earmarked to help the Santiago-based carrier unwind its ties with American’s Oneworld alliance. American has been trying to win regulatory approval for its own joint venture with Latam.

Delta’s deal furthers the carrier’s ambitions to expand internationally by buying pieces of foreign airlines, adding Latam to partners that include Grupo Aeromexico SAB, Air France-KLM and Korean Air Lines Co. Latam’s split from American will enable Delta to pursue a joint-business arrangement covering Brazil, the region’s top travel market, and three countries that have open skies agreements with the U.S.: Chile, Colombia and Peru.

“This is a big change for Latam as they unplug from American and Oneworld,” Delta Chief Executive Officer Ed Bastian said in an interview Thursday. “We immediately saw a lot of opportunities together for growth.”

Delta will exit its 9% stake in Gol Linhas Aereas Inteligentes SA, a Brazilian carrier. Gol’s American depositary receipts tumbled as much as 8.8% to $15 after the close of regular trading in New York. Latam’s ADRs surged as much as 38% to $12.40. Delta was little changed.

A representative of American said the company didn’t have any immediate comment.

A350 Moves

As part of the agreement, Delta plans to acquire four Airbus SE A350 jetliners in Latam’s long-haul fleet, plus 10 more scheduled for delivery. Latam will keep eight A350 planes.

In April, American and Latam began seeking regulatory approvals for a deal that would allow them to jointly market and operate flights between the U.S. and six South American countries. Brazil is the largest market, accounting for 30% of Latam’s overall business, Bastian said.

Delta and Latam “do not anticipate any issues” winning regulatory blessings for their joint business, a process that will likely take one to two years, Bastian said. A U.S. open skies deal is pending with Argentina, and that would eventually be included in the joint business with Latam, Atlanta-based Delta said.

The U.S. airline will gain representation on the Santiago-based carrier’s board of directors. Latam isn’t currently planning to join the Delta-led SkyTeam alliance, Bastian said.

‘Best Connectivity’

The transaction comes six months before Latam CEO Enrique Cueto Plaza plans to leave the carrier he co-founded and ran for more than 20 years. He merged Chile’s Lan Airlines with Brazil’s TAM to form the group in 2012. Since then, the carrier has struggled with a deep recession in Brazil and rising competition from budget carriers.

Cueto will be replaced by Roberto Alvo Milosawlewitsch, Latam’s commercial chief and former head of its Argentine unit.

“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,” Cueto said in the statement.

©2019 Bloomberg L.P.

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