Latam, Delta Press Ahead With Partnership
- Latam is bankrupt. And Delta has its own financial problems to address. But don’t for a minute think that either has de-prioritized their planned cooperation. Last week, the two giants submitted a U.S. Transportation Department application for antitrust immunity, a prerequisite to forming a profit-sharing joint venture covering routes between North and South America.
Latam, to be clear, isn’t going away even though it filed for bankruptcy in late May. Last week, in fact, it secured another $1.3b in financing from Oaktree Capital, to fund operations while restructuring contracts with lenders, lessors, workers, and other stakeholders. Latam also incidentally put its Brazilian affiliate into U.S. bankruptcy protection last week, having previously just filed for units in Chile, Peru, Colombia, Ecuador and the U.S. It’s closing its unit in Argentina. The group is still negotiating a deal for additional capital from the Brazilian government. But with the new Oaktree funding, plus earlier funding from Qatar Airways and two family shareholders, government financing would be more of a bonus than a necessity.
Back to the new joint venture at hand, Delta and Latam touted the potential consumer benefits, including more convenient flight schedules and the opportunity to add new nonstop routes. Most interestingly, Delta is keen on challenging American with a mini-Miami hub, envisioning a 33% increase in Miami seat capacity once demand recovers from the current crisis. It means more than 20 new domestic flights a day to Miami from Delta’s hubs and other top corporate travel centers. Latam too will add flights and seats to Miami, something it was less inclined to do with its old partner, with which it failed to win antitrust immunity — a Chilean court thought that too anticompetitive.
American, after all, is the U.S. capacity leader in South America, as it will be even after losing Latam’s friendship to Delta — a new American-Gol partnership has since come into being. United, Avianca, Copa, and possibly Azul, meanwhile, had their own pre-Covid plans for cooperation up and down the Americas. Latam furthermore, promises to add other U.S. destinations, including perhaps Delta hub cities where it’s currently absent, i.e. Atlanta, Detroit, Minneapolis, Salt Lake City, and/or Seattle. The only route where the two carriers overlap? New York-São Paulo, also contested by American and United, with Azul having planned to join just before the pandemic.
Remember too that Delta and WestJet have a joint venture application pending with DOT, setting up the possibility of Latam also working with WestJet one day.