Atlanta-based Delta and Chile’s Latam Airlines Group have entered into a partnership designed to open growth opportunities and build on the companies’ global footprint.
Delta, which operates a hub at and is the largest airline operating at Detroit Metropolitan Airport in Romulus, will invest $1.9 billion for a 20 percent stake in LATAM as well as $350 million to support the establishment of the partnership.
“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,” says Ed Bastian, CEO of Delta. “Our people, customers, owners, and communities will all benefit from this exciting platform for future growth.”
The partnership is expected to build on the companies’ footprint and joint ventures worldwide, including Delta’s existing partnership with Aeroméxico. It is expected to provide greater customer convenience and a more seamless travel experience. With their complementary networks, the companies and their partners will be able to offer access to an expanded array of worldwide destinations.
Delta also will acquire four A350 aircraft from Latam and has agreed to assume Latam’s commitment to purchase 10 additional A350 aircraft to be delivered from 2020-2025, supporting Delta’s ongoing fleet transformation. Delta will be represented on Latam’s board of directors.
The tender offer and strategic partnership are subject to customary closing conditions and required governmental and regulatory approvals, including anti-trust immunity.
Delta expects the transaction will be accretive to earnings per share 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.
For Latam, the transaction is expected to improve free cash flow generation, reduce forecasted debt by more than $2 billion by 2025, and improve the company’s capital structure, enhancing its ability to execute long-term strategy.