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Delta Acquires 20% of LATAM, Latin America's Largest Airline



The LATAM Airlines logo is displayed on an Airbus aircraft at Colomiers near Toulouse, France, November 6, 2018

Regis Duvignau | Reuters

Delta Air Lines expands its Latin American presence by spending $ 1.9 billion on a 20% stake in LATAM, Latin America's largest airline, a twist on Delta rival American Airlines, which has a joint venture with Chile Company

The Delta Declaration is the latest example of how an Atlanta-based airline is aggressively expanding abroad through joint ventures or minority interests with other carriers.

Foreign ownership rules do not allow airlines to buy foreign carriers frankly, so airlines are increasingly turning to minority stakes and joint venture revenue sharing companies to gain exposure in other markets.

Delta has stated that it expects to leave its stake in Brazilian carrier Gol, which competes with LATAM in Brazil. Delta's latest annual filing shows it has 9% in Gol.

LATAM offers services between major cities in South America and the United States, as well as domestic services in Chile, Brazil, Colombia, Peru, Argentina and Ecuador.

American Airlines is pursuing a joint venture with LATAM, a carrier to which it is already affiliated through the OneWorld alliance. Such code sharing agreements allow carriers to sell seats to one another and allow passengers to earn and burn miles from these airlines. LATAM will leave the OneWorld alliance, but it was not immediately clear whether it would join SkyTeam, a group that includes Delta and its partners.

Regulators in the US and Chile, where LATAM's headquarters are located, will need to approve Delta

"Our people, customers, owners and communities will benefit from this exciting platform for future growth." Ed Bastian, Delta's chief executive, said in a press release announcing the deal.

In recent years, Delta has steadily expanded its ownership and relationship with other international carriers. It increased its stake in Korean Air's parent company to 9.2%, announced a cross-border joint venture with Canadian airline WestJet and increased its ownership of Aeromexico, Mexico's largest airline, to 49% . [1

9659002] Bastian and his team have strengthened closer relations with Aeromexico to increase Delta's presence in Los Angeles, a key market for both airlines.

In addition to acquiring twenty percent of LATAM for $ 1.9 billion, Delta will also spend $ 350 million to expand its partnership with the carrier. As part of the deal, Delta will acquire four Airbus A350 aircraft and will commit LATAM to purchase another 10 A350s between 2020 and 2025.

Delta pays for the existing cash deal and newly issued debt.

In announcing the deal, LATAM CEO Enrique Cueto Plaza stated that "this alliance with Delta strengthens our company and enhances our leadership in Latin America by providing the best connectivity through our very complementary routing networks. "

CNBC & # 39; s Meghan Reeder contributed to this report


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