Delta will end its partnership with Gol and LATAM will drop
out of the Oneworld alliance, both as a result of Delta and LATAM's
Meanwhile, Delta and LATAM expect to begin codesharing on
routes between the U.S. and South America as soon as late this year, each said
on conference calls Friday morning. The existing codeshare agreement between
LATAM and American remains in place for now but will wind down over the next
few months, LATAM chief commercial officer Roberto Alvo said.
Delta and LATAM caught the airline industry by surprise
Thursday when they announced that Delta would invest $1.9 billion and $16 per
share to acquire 20% of LATAM. The financial commitment is the largest Delta
has made in another carrier since its 2008 merger with Northwest, CEO Ed
As part of the alliance, the carriers plan to pursue an antitrust-immune
joint venture, though they expect approval to take up to two years.
LATAM, the largest airline in Latin America, has
subsidiaries in Argentina, Brazil, Colombia, Ecuador, Paraguay and Peru.
The move strikes directly at American Airlines, until now a
Oneworld partner of LATAM's that had sought a joint venture with the carrier,
but its proposal was blocked in May by the Chilean Supreme Court.
American has leveraged its well-placed hubs in Miami and
Dallas/Fort Worth, as well as its partnership with LATAM, to be the leading
U.S. airline in South America. But Delta will now strive to claim that
According to airline data analytics company OAG, American
has 26.3% market share in South America. LATAM has 20.6%, followed by Avianca
at 12.4%, United at 11.8% and Delta at 8%.
Bastian said Friday that South America is the region that holds
the greatest growth potential for Delta. The U.S.-South America aviation market
is worth $8 billion annually and makes up 10% of the U.S. international market,
"The deal presented itself," Bastian said. "When
you have opportunities and you have the capability to move, you move."
Delta already holds stakes in Air France-KLM, Aeromexico,
China Eastern, Korean Air and Virgin Atlantic.
In addition, it holds a 9.5% stake in Brazil's Gol, a LATAM
competitor. But as a result of the LATAM deal, Delta will "regrettably"
exit that partnership, Bastian said.
Similarly, LATAM will leave Oneworld as a result of the deal
with Delta. However, the carrier will maintain existing bilateral partnerships with
Oneworld airlines British Airways and Iberia while splitting with American.
Executives at Delta and LATAM said they don't expect to run
into the same challenges with regulators that LATAM and American did in their
attempt to form a joint venture. They said that while the American and LATAM
networks have substantial overlap through Miami and elsewhere, Delta and LATAM
currently compete on just one route -- Sao Paulo to New York. That route will
be left out of the proposed joint venture, said LATAM CEO Enrique Cueto Plaza.
"So we believe the approval process will be well-received,"