Delta Air Lines Thursday announced a deal to buy a 20% stake in LATAM Airlines Group for $1.9b, creating a major new airline partnership and shaking up the Chilean carrier’s longtime ties with American Airlines. The surprise deal, which Delta will fund with newly issued debt and available cash in its largest investment since its merger with Northwest Airlines a decade ago, could upend American’s stronghold on the Latin American region. LATAM has been a member of the Oneworld alliance since 2000 alongside longtime partners American, British Airways and Iberia, with which it had been pursuing a deeper route alliance that was rejected by the Chilean Supreme Court last May. Delta does not expect regulatory obstacles for its tie-up with LATAM, where it will gain representation on the board of directors. The plan envisions growth for both carriers, which currently overlap on only one route, CE Ed Bastian said. “I think it’s a great fit,” he said. Delta, which is part of the SkyTeam alliance, expects the LATAM deal to be accretive to earnings per share over the next two years and add $1 billion in revenue growth over five years, Bastian said. Delta will also provide LATAM an additional $350m to help it transition out of Oneworld and plug into Delta’s network. The two can start code-sharing before they receive government, regulatory and anti-trust approval for the larger tie-up, a process Bastian said he expects to take between 12 and 24 months.<br/>
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Air France-KLM boss Ben Smith Friday defended his decision not to fly to the aid of two collapsed French airlines, and said market consolidation through bankruptcies would eventually benefit the country’s aviation industry and jobs. Air France last week withdrew a rescue bid for Aigle Azur, which was formally wound down on Friday, and has since rebuffed overtures by XL Airways, another insolvent carrier. “There is going to be consolidation,” the Air France-KLM chief executive told reporters at a ceremony in Toulouse marking the delivery of Air France’s first Airbus A350 jet. “We believe positive results will come out of it, to ensure that airlines that are based here in France will be stronger to compete globally,” Smith said. “The jobs associated with those larger more powerful airlines will be created here in France.” While six airlines currently compete on London-New York routes, the smaller Paris-New York market is contested by 10 rival carriers, the CEO said. Air France now stands to pick up some of Aigle Azur’s valuable take-off and landing slots at Paris Orly airport, after a bankruptcy court rejected the last two remaining bids for the failed airline on Friday, effectively sealing its fate. <br/>