Delta has a proud history of savvy airline investments and running a tight ship.
Just 8 months ago Delta shocked the aviation world by stealing LATAM away from American and the OneWorld Alliance as part of a new joint venture agreement.
It didn’t come cheap. Delta invested $1.9 billion to obtain a 20% equity stake in LATAM. They also agreed to buy 4 A350s in LATAM’s possession and take over LATAM’s commitment to buy another 10 A350s from Airbus.
But American has long been the strongest US airline in South America and their codesharing partnership with LATAM was a key component in that strength. The loss of LATAM left a gaping whole for American and the OneWorld Alliance.
The airline will continue to fly and their mileage program is safe for now, but Delta’s investment is looking a whole lot less valuable these days.
Delta no longer wants to spend the money to retrofit LATAM’s A350s with their own seats and colors, so they’ll pay another $62MM to LATAM to avoid taking them over. Delta also agreed not to void their joint-venture agreement as part of that payment.
Meanwhile, in February American joined up to codeshare with Brazil’s GOL to fill some of the void left behind by LATAM. That agreement didn’t cost American a dime.
Delta may still emerge as a winner in the long-term with their LATAM steal, but that’s looking a whole lot less certain today.