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Delta Purchases $1.9 billion LATAM shares

Delta Air Lines mentioned Thursday it could buy a 20% stake in LATAM Airways Group for $1.9 billion, creating a significant new airline partnership and ending the Chilean carrier’s ties with American Airlines.

The shock deal with Latin America’s largest carrier will give Delta a much larger footprint in the area, a key development market in which LATAM flies to dozens of locations including cities in Argentina, Peru, and Brazil.

The LATAM deal is Delta’s most significant since it merged with Northwest Airlines a decade in the past.

American Airlines Group Inc, which has long been the main U.S. carrier in the area and was pursuing a deeper route alliance with LATAM, said the lack of its Chilean partner wouldn’t have a major impact on its financial results.

American added that its LATAM collaboration had limited upside after the Chilean Supreme Court struck down the two carriers’ plans for further route cooperation that might have additionally concerned Oneworld alliance members British Airways and Iberia.

Following its collaboration with Delta, LATAM will exit Oneworld and pursue route options with Delta and its associate Grupo Aeromexico, which belong to the rival SkyTeam alliance. It has not, nevertheless, decided whether or not to be a part of SkyTeam formally.

Oneworld said LATAM had suggested it will leave the alliance in “due course” according to contractual requirements, without naming a particular date.

Airlines more and more have bilateral codeshare arrangements outside the main alliances. Qantas Airways Ltd, a Oneworld member, stated it could retain its codeshare partnership with LATAM regardless of the Chilean carrier’s departure from the coalition.