Delta and LATAM Airlines Group have entered into a strategic partnership that for the first time combines the strengths of the leading airlines in North and Latin America. LATAM informed oneworld 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.
“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.”
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, 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
- Delta will also invest $350 million to support the establishment of the strategic
- 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
- Delta will be represented on LATAM’s Board of Directors, further strengthening the
- The tender offer and the strategic alliance are subject to customary closing conditions and all required governmental and regulatory approvals, including anti-trust
Delta expects that the transaction will be accretive to EPS over the next two years. 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.
LATAM expects 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.
Delta is part of the SkyTeam alliance. Through its innovative alliances with Aeroméxico, Air France-KLM, Alitalia, China Eastern, Korean Air, Virgin Atlantic, Virgin Australia, and WestJet, Delta is bringing more choice and competition to customers worldwide.
oneworld said in a statement, “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.
oneworld remains a strong coalition of high-quality airlines. There has been significant progress in member airlines deepening their bilateral relationships, as evidenced by the recent regulatory approval of the American Airlines and Qantas joint business.”
