LATAM’s Bankruptcy Makes Delta’s Steal Look A Whole Lot Murkier

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Brian Bukowski [CC BY-SA 2.0], via Wikimedia Commons
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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.

And then COVID-19 hit. LATAM declared bankruptcy today in the US, following in Avianca’s footsteps as they attempt to shed debt via the US Chapter 11 restructuring process.

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.

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22 Comments On "LATAM’s Bankruptcy Makes Delta’s Steal Look A Whole Lot Murkier"

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Pad18

No one had a clue of the Covid-19 .. so when they did the purchase/steal it was an excellent mouved..

Elchonon Weissman

I have a flight with Latam airlines in august should I be worried about not getting a refund?

Ricola

Hi Dan. Completely not related to this, but you are my travel guru so I figured I’ll try to ask. My daughter had a return flight booked for mid June on ElAl for her seminary homecoming. Obviously, she is still in America since Purim so she wouldn’t be taking that flight anyway. As per your instructions, I was waiting till the last minute to see if they would cancel. I got an email from El Al today stating:

Dear EL AL Passenger,
Due to the COVID-19 situation your flight that was scheduled to depart on 01-20/06 has been canceled.
At this period we will freeze your ticket.
Change of a destination or receiving a refund for your ticket will be done once we will return to a full operations.
You can follow our flight schedule on our website: http://www.elal.com
We wish to apologize for the inconvenience.
EL AL.
I thought they were past these shenanigans. Do I truly need to wait for them to resume operations to receive a refund? Maybe I haven’t been understanding your posts. Would you be able to shed a bit of light on how I should proceed? I apologize if this has been covered ad nauseam and I thank you in advance for all you do for the Klal.

Yochai

If you booked with a travel agent or website, contact them for a refund. If you booked directly with them, fill out the form on their website.

Eliyahu

BH I was offered a refund for Aug trip JFK LIM SCL PMC SCL JFK booked on I class intl and Y domestic. They said likely will not fly.

Missed the boat

What does this mean? That the airline will close down or just means that they will restructure?

rob

And not for nothing, but Avianca also declared bankruptcy.

This might be one of those times where AA is saved by their own incompetence

Seth

Does this mean I won’t get my pending reimbursement from LATAM for cancelled flights?

Menashe

@Dan Why do you write millions $MM and not just $M? Never understood.

Damon

M = 1000

Bostener

How could Delta emerge as a long term winner?

How do you win with an investment in a company that declared bankruptcy?

Yossi

Is latam returning planes?

Nate nate

When you say “another $62MM”, what does “another” refer to? Is that in addition to the purchase price? If not, doesn’t seem like “another “ is appropriate.

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