Delta-LATAM partnership causes major changes in commercial aviation market

Two of the world’s largest airlines announced on Thursday a deal that promises to change the balance of power in the Americas

The announcement that Delta Air Lines will buy 20% stake in LATAM Airlines took the market by surprise on Thursday. The association between the two companies even seemed unlikely given their involvement with other groups.

LATAM already had a longstanding relationship with American Airlines and had plans to set up a very large joint venture, but it was eventually blocked by the Chilean courts. In addition, the two were partnerships with Oneworld, an alliance that also includes British Airways.

Delta, for its part, has been expanding its stake in companies worldwide, having acquired part of Virgin Atlantic, Alitalia and expanding its partnership with Air France-KLM. In South America, the company owned about 10% of Gol Linhas Aereas and this share was expected to increase following the deregulation of the Brazilian aviation market.

The strategic partnership between Delta and LATAM already begins with significant changes. The US airline has already confirmed that it will sell its stake in Gol while the South American group announced its departure from Oneworld, steps expected after the announcement.

Affected by the deal, American and Oneworld regretted the fact but said they understood the situation.

“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 US carrier that is not 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,” said the airline.

“LATAM advised oneworld earlier today 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 They have been a valued long-term member of the alliance, and we wish them well,” the alliance said in a statement.

Delta rival American Airlines was a longtime partner of LATAM

Rebalancing of forces

With the society there will be a rebalancing of forces at some strategic points of air traffic between South America and the Northern Hemisphere.

Flights between Brazil and the United States, for example, will have a greater boost as LATAM has a much broader footprint than Gol, including to destinations in Florida, where Delta recently withdrew. For LATAM passengers, there will be nearly as wide a network of connections to other destinations in North America and less overlap as Delta has focused its flights to its Atlanta hub.

In Europe, the partnership with British Airways will switch sides to LATAM. Now it is Virgin Atlantic that could be a counterpart to the South American company.

A former LATAM partner, Air France will once again have an indirect connection with LATAM as well as KLM. Today the two European companies have a large network of flights to Brazil, including the new hub in Fortaleza that was feeded by Gol flights. The trend is that LATAM will now share flights in the Brazilian city.

As for the fleet, the transfer of part of the A350 to Delta signals that LATAM can seek standardization in its equipment in the medium term. Currently, the group also operates the Boeing 787 and has decided to refresh the 10 Boeing 777-300ER inherited from TAM. It remains to be seen how LATAM’s Brazilian arm will expand its long-haul jet fleet without relying on the modern Airbus two-engine widebody.

Questions like this can be clarified on Friday when the two companies will speak to their investors and the press. What is certain is that the deal between the two airlines is likely to trigger other major changes in the region in the future, which is expected for the sake of their customers.

Delta-Air France partnership should bring LATAM closer to European airline (Mathieu Marquer)


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