Earlier I wrote about how LATAM is filing for Chapter 11 bankruptcy in the US. In LATAM’s First Day Declaration, an interesting revelation was made regarding an A350 deal that Latin America’s biggest airline had worked out with Delta.
Continue reading: Delta Pays LATAM $62 Million To Undo A350 Deal
Share your questions, experiences, and thoughts below.
As you state Lucky, with Latam entering Chapter 11 this is a cheap way for Delta to fund their partner whilst also keeping assets at Latam which can subsequently be sold in the open market, or sold and leased back to provide further funds to the company which may help with cash flow.
I guess that Delta will also a lot of money through the 20% investment in LATAM as equity holders are treated below secured and unsecured creditors in a bankruptcy. Best case, the investment will be diluted; worst case, it could be worthless
Probably would have spent that amount putting new interiors and repainting the four planes. Without knowing all of the details I suspect Delta is trying to limit capital expenditures in the short run.
That seems like a good deal on A350s....especially since avoiding delivery requires a $62 million check at a time when cash is scarce. Why not just take delivery and park them in the desert for a couple years until demand recovers?
I bet LATAM wishes they never parted ways with OneWorld and AA. What a @#$% show DL is if your their partner. They have basically turned their backs on Virgin (both of them); Alitalia; now LATAM (you could also say Korean Air to some extent too). This opens a huge door for GOL which seems to be the only Latin American airline with a plan. QATAR is also helping to finance LATAM so this could be a huge win for One World (they have a fox in the hen house so to speak).
DL/LATAM will take years to fix the mess they created; AA and GOL (with OneWorld) will strengthen the network and continue to become the lead dog (AA already is) in Latin America. Airlines will think twice before working with DL once this is all over.
Delta doesn’t want these 4 specific early build A350’s due to its sudden need for higher gross weight 350’s in leu of the 777 removal decision.
Delta hasn't really had a choice but to walk away from its foreign equity investments. The terms of its US govt bailout meant it couldn't put any money in these foreign airlines even if it wanted to.
LATAM has really lost out in all of this. It was forced to look for another partner when Chile said no to the AA JV--it needed money and it needed a US partner. It could have accepted a less than ideal US partnership and probably got investment from Qatar. Instead LATAM agreed to Delta because they were offering money and agreed to build out Miami (LATAM's key hub) as a focus city.
Unlikely Delta will now want to put money into fighting AA in Miami for a while. LATAM is now left with a pretty pointless US partner, unless it shifts flights to Atlanta, but the O&D business there won't be good. It probably would have been better with the less than ideal AA partnership than what it will get now.
As LATAM was leaving oneworld for Delta, its European JV plans with IAG were abandoned. Its partnership with Iberia weakened leaving it lost in Spain, its 2nd strategic market. Iberia announced the acquisition of SkyTeam's Air Europa meaning that option to connect traffic into Spain and Europe was gone.
Would you say Chile denying the JV between LATAM and AA just about snowballed the bankruptcy of LATAM? Obviously with the catalyst of the COVID19. Would LATAM had been better off JV’ing with AA to weather through that timeline you brought up?
As I recall reading, the whole thing came because LATAM and AA and IAG could not do a JV without proof there would be competition on Chile-Spain between OneWorld and "not OneWorld."
Assuming a successful IAG buyout of Air Europa, OneWorld would have a true monopoly on the route. Thus, the JV wasn't going to be approved, and that was likely to hurt LATAM going forward.
@sunviking82 If you seriously think that OW is going to dominate Latin America because of GOL, you’re delusional. There’s a reason why DL left GOL in favor of LATAM. Also, the only reason why AA had such a large upper hand in Latin America was due to its partnership with LATAM. Now that that’s gone, it has lost its upper hand. Additionally, with what money do you think DL would be able to bail out LATAM, VS or VA? It’s in an economic crisis of its own. The same exact thing would have happened if LATAM or any other airline in a similar position had partnered with AA.
I say LATAM has itself to blame for the mess it is in. Why would anyone team up with an airline like DL that has an established track record of ditching partners. Not to mention a long list of loss-making partners, all of whom are now basically lining up for bankruptcy. As we can see, not only does DL not participate in the restructuring, they even go ahead and cancel the A350 orders. I guess we are only beginning to witness the collapse of 'DL partners'.
Giving up membership in oneworld and blowing off AA and IAG was clearly the dumbest strategic decision that any airline would have taken in decades. Such a sad state of affairs for LATAM. A JV with DL will do absolutely nothing to help them navigate through this time. They are simply going to struggle with their US operations for the forseeable future. Hoping at least LATAM v2 makes some decisions going forward...
Are the 4 A350's the ones LATAM directly operates or the ones leased to Qatar?
As an American, I want to know where Delta is getting the $62 million it’s paying LATAM to cancel the A350 purchase? Aren’t we taxpayers giving Delta a financial bailout due to the Covid pandemic? If they have $62 million to blow, perhaps they don’t need the American taxpayer’s money. At the very least the government should withhold that amount from their bailout.