OMG: Delta Buying 20% of LATAM, Steals American’s Potential Joint Venture

Delta announced that they’re taking a 20% stake in LATAM, the largest airline conglomerate in South America comprised of LATAM Argentina, Brasil, Colombia, Ecuador, Paraguay, and Perú.

The 20% stake will cost Delta $1.9 Billion. They will also be “spending $350 Million to expand its partnership with the carrier” and “acquire four Airbus A350 planes and assume LATAM’s commitment to buy 10 more A350s between 2020 and 2025.”

Copyright: artzzz / 123RF Stock Photo

LATAM was formed by merger of LAN and TAM. Given the large presence in Brazil, Delta will give up its 9% stake in Brazilian carrier Gol.

American Airlines had worked towards a joint venture with LATAM but it was rejected by Chile’s Supreme Court this spring.

LATAM will exit the oneworld alliance, although no plans have been announced for their entrance to SkyTeam. Delta’s CEO says SkyTeam has failed and this is his next step towards creating his own partially owned-carrier alliance. It adds to Delta’s 49% stakes in Virgin Atlantic and Aeromexico, and stakes in Air France KLM, Korean, and China Eastern.

American Airlines says good riddance, their current LATAM partnership drove less than $20 million in revenue and a joint venture without the Chilean component “would have provided limited upside.” This is a huge move for Delta, and despite their statement a blow to American.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Dougie is so smart, Latin America doesn’t matter, not a big profit center at any of the hubs like MIA or DFW to lesser extent…

  2. The Latin American routes kept American Airlines financially solvent during some dark years. They even had an ad that showed an AA aircraft with the words Latin AAmerican underneath. The MIA-SCL routes were the jewel in the crown, and the AA partnership with LAN was a key element. What a surprise to see Delta make such an aggressive move on AA’s home turf. Delta’s strategy of partial ownership of foreign carriers seems to be beating AA’s strategy of joint ventures.

  3. @D – I linked to the article on LATAM leaving oneworld. And AA’s release said they’d be working with affected passengers, which wouldn’t be necessary if the airline was remaining an American partner.

  4. Very bad news for those like me who use British Airways points for short LATAM flights in South America

  5. Latin American economy is in decline. It’s not a premium heavy or a business heavy market. Why the hysteria? Lets just follow the teenage girl shrieking of Ben or Lucky or whatever he calls himself. It’s business not some housewives of aviation show.

  6. Gary
    Do you think there will be any issues with the Chilean Supreme Court for Delta?
    As a DTW guy, I’m looking forward to the interesting opportunities that this Delta purchase will make available to me!

  7. Delta is getting payback for AA besting it with China Southern leaving Skyteam. Interestingly, Delta still lets people earn SkyMiles on CZ and book CZ tickets with SkyMiles on its website even though CZ is now a AAdvantage partner. and not part of SkyTeam. Award availability is actually much better with Delta than American, and Delta charges twice the miles for the same trips within Asia. Given the relative growth prospects and airline rating of CZ and LATAM, AA wins that trade.

    Given the continuing relationship between DL and CZ, must there be significant change for AAddvantage members when LATAM leaves Oneworld?

  8. So Delta gets control of yet another foreign airline? Oh good! How could this possibly be bad for the consumer?

  9. @Gary – I’m probably the only person who thought about this at all, but am I crazy to think that Aerolineas Argentinas is another potentially huge loser in this deal? While I understand LATAM to be a solidly average airline overall, I can’t imagine any frequent flyer alive who is saying they’d rather fly Aerolineas over LATAM to or within Argentina.

  10. Very few things are actually “shocking” in the airline industry, but this one qualifies. DL is spending a small fortune on this stake — and paying an 80% premium to LATAM’s current stock price to buy that stake. Meanwhile, AA’s statement that the existing alliance drives only $20 million in revenue (that’s revenue folks, not profits) is also shocking. If that’s the case, how on earth can DL get its money’s worth from this purchase?

  11. AA will connect with GOL which will work out well since AA covers South America better then any other US Airline. I much rather have China Southern than Lantam . I am sure Lantam went airline to airline looking for money and DL got the check book out. I think 99% of OW and AA passengers won’t care.

  12. Seems like a disaster scenario for AA, which essentially outsourced its once prized South America routes and operations to LATAM, and is now left without that business — and no longer has one of its own.

  13. OMG…’s frightening to imagine an obese man in their 50’s talking like this.

    Gary – you’re not a teen.

  14. @Aerolineas Argentinas – they’re a loser but the airline is a pretty big loser to begin with, and can’t possibly be benefiting that much from the Delta relationship.

  15. @Larry B – Delta certainly seems not to think there will be. Delta has just a single Chile flight (ATL-SCL) as far as I can recall, so this deal shouldn’t create too much of a change for US-Chile competition.

  16. @Gary, Delta doesn’t care about CZ – so says Delta. LATAM has negligible growth prospects compared to CZ. But if DL doesn’t care about CZ, why does DL still maintain exactly the same relationship with CZ as far as earning and burning (including MQMs and MQDs) almost a year after CZ left Skyteam? That’s an issue I’d be interested in getting expert opinions on. There is no announced CZ relationship end date either. Could AA therefore maintain the same relationship with LATAM after it leaves One world? CZ is a much better and larger airline compared to MU.

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