Delta gets approval for joint venture with LATAM

Monitor Online Date: 03 October, 2022
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Delta Air Lines has received federal regulatory approval of its long-planned joint venture with South American airline group LATAM.
   The antitrust immunity granted by the U.S. Department of Transportation for the joint venture allows Atlanta-based Delta and Chile-based LATAM to start coordinating prices and flight schedules on flights between the U.S. and South America.
   Delta said the partnership will increase routes to Brazil, Chile, Colombia, Paraguay, Peru and Uruguay. CEO Ed Bastian said in a written statement it “will help grow the market between North and South America.”
  Plans for the joint venture between the two carriers date back to 2019, when Delta announced it would spend $1.9 b for a 20pc stake in LATAM — its largest acquisition since the Delta-Northwest merger in 2008.
   The deal was intended to make Delta stronger in South America, a crucial region where it trails competitors including American Airlines. Delta previously had a partnership with Brazilian carrier Gol before striking the agreement with LATAM.
   For years, Delta has used its Atlanta hub as a gateway to Latin America. But in the LATAM partnership, Delta will use Miami as a hub for flights to South America.
    However, DOT imposed some restrictions on the joint venture, including removing an exclusivity provision in the deal, requiring both airlines to maintain interline agreements with other carriers, removing capacity constraints to limit growth, limiting coordination on tariffs, requiring annual progress reports and limiting the antitrust immunity to 10 years, unless extended after an evaluation.
    The pilots union at Delta opposed some of the DOT’s restrictions, with the union saying the original agreement would have ensured Delta and its employees received “a fair share of new flying” in the deal and that an exclusivity clause would have prevented Delta from outsourcing South American flying.
    The DOT responded that it found the joint venture “would generate substantial new flying opportunities, which forms a critical foundation of the public (and consumer) benefits that we expect to be created.”
  Delta and LATAM in the past few years rolled out some elements of their partnership, including starting “codesharing” in 2020 to market each other’s flights and adding reciprocal frequent-flier benefits. The DOT approval marks a key milestone for the Delta-LATAM joint venture.
-B

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