Friday, 27 September 2019

Delta and LATAM Airlines enter into strategic partnership


The partnership brings together the leading airlines in North America and Latin America, connecting the Americas to the world as never before
Together, Delta and LATAM will hold the leading position in five of the top six Latin American markets from the U.S.
Together, the partners will serve 435 destinations worldwide and carry more passengers between North America and Latin America than any other partnership
Customers will benefit from significantly expanded travel choices across the Americas and an industry leading customer experience


Delta and LATAM Airlines Group have announced that they have entered into a strategic partnership which according to the Delta chief Ed Bastian, is "A transformative partnership with LATAM will bring together our leading global brands, enabling us to provide the very best service and reliability for travellers to, from and throughout the Americas,” said “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 airline' says this 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, a 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 cash.
Delta will also invest $350 million to support the establishment of the strategic partnership.
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 transformation.
Delta will be represented on LATAM’s Board of Directors, further strengthening the relationship.
The tender offer and the strategic alliance are subject to customary closing conditions and all required governmental and regulatory approvals, including anti-trust immunity.
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.

 American Airlines and LATAM

LATAM and 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 U.S. carrier that isn’t 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, and the proposed joint business without Chile would have provided limited upside. During the transition period, American will work with LATAM to ensure a seamless experience for customers. American Airlines remains the largest U.S. carrier to both Latin and South America and we look forward to competing and growing in this region of the world.


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