Delta rocked the aviation industry Thursday by announcing it had acquired a 20% stake in LATAM, Latin America’s largest airline, an unexpected step toward a close partnership that should help Delta flyers travel to and throughout both continents.
Delta’s acquisition – and the airlines’ plans to form a joint venture – would give the Atlanta-based airline a huge presence in Central and South America, where Delta has traditionally been far weaker than other competitors. While LATAM is headquartered in Chile, it has several subsidiary airlines in Argentina, Brazil, Colombia, Ecuador, and beyond.
Delta said its brewing partnership with LATAM would make it the leading airline coalition in five of the top six Latin American cities with flights from the U.S. Think Santiago de Chile (SCL), Buenos Aires (EZE), Sao Paulo (GRU), and others.
While Delta’s nearly $2 billion investment may seem like a corporate maneuver, it could have huge benefits for travelers looking to travel south. It opens far more options for frequent Delta travelers to fly throughout Latin America. And it raises the prospect – perhaps in the near future – of using Delta SkyMiles to do it.
“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,” Delta CEO Ed Bastian said in a statement.
But there’s another huge benefit to Delta: The airline is taking four of LATAM’s Airbus A350 planes, as well as assuming another 14 of LATAM’s orders. These are state-of-the-art planes are Delta’s flagship aircraft for long-haul flights, equipped with Delta One suites and Premium Select seats.
Delta already has 15 of these A350s in its fleet, Bastian said, but seemingly can’t acquire more fast enough. These planes from LATAM should help fuel Delta’s growth.
At the risk of sounding overdramatic, this is huge. It’s a massive win for Delta – and a huge loss for American Airlines.
Delta is essentially snatching LATAM away from American – which had tried and failed to set up a similar relationship with LATAM. Delta’s move means LATAM is pulling out of American’s Oneworld airline alliance altogether.
I’m going to have to digest this @Delta @LATAMAirlinesUS news before writing it up for Monday, but my initial impression – this is monumentally huge. It puts Delta at a whole different level while knocking American down a peg. This could reshape global alliances.
— Brett Snyder (@crankyflier) September 26, 2019
In buying such a large stake in LATAM, Delta is repeating a so-far successful strategy of investing in partner airlines to build a tight network of airlines – far stronger (and more beneficial to Delta) than a traditional airline alliance like SkyTeam.
Delta owns nearly 50% of Virgin Atlantic, and has large stakes in Air France/KLM, Korean Air, and AeroMexico. All these moves help travelers seamlessly travel internationally with Delta, then connect onward with a partner airline. And by buying large stakes in these airlines, Delta can have a critical say in how they’re operated.
Delta confirmed Thursday that it would be represented on LATAM’s board of directors.
The one big downside is that while it will get easier for loyal Delta flyers to travel with LATAM, it will get harder for everyone else. LATAM’s exit from Oneworld means you’ll no longer be able to use AAdvantage miles to book these flights, along with many other airlines. And Bastian said Friday that LATAM has no plans to join the SkyTeam alliance.
Delta just pulled off the coup of the year – perhaps the decade. This change should help travelers who trust Delta get to Central and South America, regions where Delta hasn’t been very strong. And it should help Delta, to boot.
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