Delta Airlines (NYSE: DAL) made news today when it announced that it was buying a 20% stake in LATAM Airlines Group, a major Chilean airline. Specifically, the investment would give Delta a major position in five out of the six top Latin American flight markets from the U.S.
This surprise agreement is just another instance of how Delta has been focused on expanding aggressively in international markets, primarily through joint ventures or minority stakes.
When it comes to airlines, foreign ownership rules prevent airlines from buying a majority stake in a foreign airline, so instead many American companies have decided to pursue minority stakes instead. LATAM Airlines Group offers flights to most of the major cities in South America, alongside domestic flights within Brazil, Colombia, Chile, Peru, Ecuador, and Argentina.
“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. Our people, customers, owners and communities will all benefit from this exciting platform for future growth,” said Ed Bastian, Delta Airline’s CEO. “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,” added Delta’s LATAM chief, Enrique Cueto Plaza.
The news also was a big deal for American Airlines (NASDAQ: AAL) for an entirely different reason. American Airlines had been trying to form its own joint venture agreement with LATAM as well, due in no small part to the fact that it’s a member airline of the OneWorld alliance.
In light of this announcement between itself and Delta, however, LATAM will now leave the OneWorld alliance but hasn’t confirmed whether or not it will be joining Delta’s own airline alliance, SkyTeam.
Other major deals that Delta has made in recent years include its ownership of Korean Air, where the American airline owns a 9.2% stake in. At the same time, Delta announced a joint venture with Canadian airline giant WestJet while also expanding its stake in Mexico’s largest airline, Aeromexico, to 49%.
Delta’s stock didn’t’ move much in response to the news, inching up only 0.8% on Thursday. The company has done modestly well since the beginning of 2019, gaining around 18% since January.
In comparison, its competitor American Airlines has fallen by roughly 10 percent over that same time period, while Southwest Airlines (NYSE: LUV) has also gained 15.7%. Overall, Delta remains one of the best airline stocks to invest in, with the majority of analysts covering the company issuing a “buy” rating over the stock, although there are a few that have a “neutral” rating instead.
Delta Company Profile
Atlanta-based Delta Air Lines is one of the world’s largest airlines, flying to more than 325 destinations in 60 countries. Delta operates a hub-and-spoke system, where it gathers and distributes passengers across the globe through key locations in Atlanta, New York, Salt Lake City, Detroit, Seattle, and Minneapolis-St. Paul. Delta generated just over $41 billion in revenue during 2018 and operated a mainline fleet of more than 850 aircraft. – Warrior Trading News
