Delta, Korean Air, And Air France-KLM, Invest In WestJet, Acquire 25% Stake

Ben, what does "upper middle market private equity platform" mean?

Could LATAM really join Skyteam without the approval of their major competitor Aerolíneas Argentinas?

"Middle market" refers to an ill-defined set of privately held companies between large corporations and truly small businesses. Broadly, with revenues/values of $5 million on the low end to perhaps $3 billion on the high end. The middle market is stratified into bands, with the upper middle market being roughly $500 million to $3 million depending on who one asks. The "platform" is an investment firm's means to access such companies.

It means Ben cut and pasted from the press release. Onex is an also-ran private equity sponsor.

Sounds good to me. $600 million for a 25% stake. So, I guess, they 'value' Westjet at $2.4 billion.

Sheesh, a lot of these numbers are really just made up at the end of the day. Would be a shame if all of the sudden our 'human construct' of the 'economy' were 'bubble' or something... Anyway, I hear 'artificial intelligence' is all the buzz, like 'crypto' and 'blockchain' and 'Fintech' and 'an app for everything' and 'dot com' and 'radio' and... whatever that crazy 'Gutenberg' is up to. Anyway, we should all probably 'get in on this'... what do we have to lose!

Jack gets it.

Scudder, it means 'made-up corporate-speak.'

Private equity can value anything whatever it wants and there are never any audits. Ripe for fraud. We're re-living the lead-up to 1929. Start speculating on-margin. What could possibly go wrong. Eat the corn seed. It's delicious!

Is there gate space for WS to come back to Toronto after they pulled back? Seems like Porter took a lot of their former space at YYZ.

WestJet has become a western Canadian airline with a presence in the eastern vacation market primarily to Mexico and the Caribbean in the winter. The pullback from the eastern hub at Toronto cedes the European market there largely to Air Canada and Air Transat. This has not been a good thing for competition so any move that would introduce a greater presence in Toronto (capital infusion and larger fleet) and other eastern hubs would be a good thing. The culture at Westjet has changed significantly of late, and many say not for the better.

Fantastic news.
Hopefully they keep growing, as does Porter.

We need competition up here, and any business taken away from AC is a good thing.

I don't get why Delta sees itself as a premium airline and yet invests in an airline that will create a section with seats that do not recline. In a similar vein, I asked myself why Delta would partner with China Eastern when the cockpit crew smoked during the flight I was on. No consistency in "premium" offerings.

That's a lot of money for Delta to commit at this time. They are struggling against United. They will need their lawsuit against Delta Hotels to be successful to pay for this expense.

Hear! Hear!

Canada has a protected aviation market, but could the current Prime Minister change that, allowing foreign airlines more slots, more routes, more frequencies? Unfettered access to the routes they would like? Could US airlines start flying Canadian domestic routes? This little Westjet deal would have been forbidden under many past regimes in Ottawa. Is it a sign? Will Canada become the Aviation "51st State"?

One can see the appeal, to an American aviation exec. Congrats Delta on this incremental step. But filling up our skies with Americans doing our jobs isn't the plan.

I hope this deal leads to Westjet becoming something. Now, they're a LCC with lipstick. One can hope that another Canadian airline can offer something as good as foreigners offer, including loyalty rewards, Alliance connectivity, premium cabins. Only AC, whatever its faults, does that. This deal doesn't change that.

Delta and Korean each has a 25% stake in Westjet and has been for many months even as long as a year. That said I am not understanding your message.

All in all - good news for using KLM points. Me and my family often use KLM miles to book WestJet regional hops, which can get expensive, but cost only 5K - 6K KLM miles, and availability is massive in Y, with most flights having Y reward seats even shortly before departure.

I hope now that WJ starts providing reward space to partners in J on their 789 and domestic Premium cabin.

I doubt Canada is going to allow US airlines to fly intra-Canadian routes. Surely that runs the risk of Canadian airlines going bust and the country then relying on US airlines, which I doubt is a vote winner. And I can’t see the US allowing domestic competition from Canadian airlines.

WestJet is awful. Just awful. I have to fly them twice a year into Canadian markets. The lounge in Calgary is at best an average Priority Pass lounge. And remarkably, they lack a lounge in Toronto. WestJet can't decide if it's a low-cost airline or a flag carrier.

Aerolineas Argentinas would have no say in that. The only four carriers in SkyTeam with veto authority are Delta, Air France, AeroMexico, and Korean Air.

However, it would need a sponsor carrier though, and then there's also the question of which LATAM would even join.

LATAM is not one airline, but a combination of several separate carriers operating under joint marketing.

So would LATAM Chile (the former LAN) join?
Or would LATAM Brasil (the former TAM) join?
LATAM Colombia? LATAM Peru? LATAM Paraguay? LATAM Ecuador?

Every single one of these is a completely separate operational certificate, flagged in a different country, controlled by a different CAA's authority, and subjected to different route/bilateral/accesses.

Trying to bring them all into SkyTeam would be a logistical nightmare; and bringing just 1 or 2, but not the others, could be more confusing to both passengers and corporate clientele alike, that it's just not worth it.

It's speculative, but that's my best guess on why it hasn't happened, and doesn't appear to be on a path to happening.

@ConcordeBoy--the complexities you describe for LATAM's joining SkyTeam would make more sense if they had never been in another alliance. How did this work when they were in oneworld? Which of the several companies that make up LATAM were/were not in that alliance?

Reclining seats are highly overrated, especially on short haul flights. Most airlines (even Delta) these days have reduced seat pitch such that it has become rude to recline (at least very much), even in first class. If the person behind you is trying to work on a laptop, reclining can make that nearly impossible. It makes it difficult even to get out to the aisle from one's seat. If everyone is sleeping, e.g., on a redeye or long international route, recline makes more sense. Regardless, it's not my first criterion for judging an airline.

Interesting combo of my hometown airline Delta (most valuable globally by revenue, assets, market cap, brand value), Air France (arguably the best European airline right now..also according to Ben's in-depth reviews!), and Korean Air which is also a highly-respected airline.

Looks unprecedented, 3 different airlines from 3 different regions buying equity stakes in this way!

As Canadians want more competition and better choices, will be interesting to see how they help WestJet go to an unprecedented level and provide some good competition to Air Canada.

How did this work when they were in oneworld?

Only LATAM Chile (the former LAN) was in OneWorld.
LATAM Brasil (the former TAM) was in Star.

Both had already been part of those alliances before adopting the LATAM branding, so there was never really a question/challenge of bringing them in. They left their alliances in 2020 and 2014 respectively.

Thanks for satisfying my curiosity. That was helpful.

Does Delta know that Westjet charges for seat reclination on 737 flights? Or is this a sign of things to come for all airlines? Sigh.

Fair post. I find Westjet is in consistent. Just flew a flight with phenomenal service but their mixed fleet of swoop, wesjet and sunwing is a hot mess. They used to be great but when Private Equity bought them, that started the whole decline.