Delta Buys Stake In Korean Air

Filed Under: Delta, Korean Air

Wow, this is a significant development.

Delta acquires stake in Korean Air

It has just been announced that Delta has acquired a 4.3% equity stake in Hanjin-KAL, the largest shareholder of Korean Air. Delta plans to increase their equity stake in Korean Air to 10% over time, pending regulatory approval.

Delta and Korean Air have had a joint venture since May 2018. This joint venture gives passengers access to over 80 destinations in Asia, and over 290 destinations in the US. This investment is an expansion of that.

Delta CEO Ed Bastian had the following to say regarding this investment:

“Together with the team at Korean Air, we have a vision to deliver the world’s leading trans-Pacific joint venture for our shared customers, offering the strongest network, the best service and the finest experience connecting the U.S. with Asia. This is already one of our fastest-integrating and most successful partnerships, and experience tells us this investment will further strengthen our relationship as we continue to build on the value of the joint venture.”

Korean Air A380

What’s Delta’s motivation for investing in Korean Air?

American, Delta, and United, all have joint ventures. This essentially allows them to coordinate pricing and schedules with another airline, to create a strong presence in a market (it’s debatable whether passengers benefit from this or not).

What makes Delta different from the competition is the amount of control they like to have in these joint ventures. Delta is not only heavily focused on building joint ventures, but they also like to invest in airlines they partner closely with.

In many ways Delta is trying to build a global network through investments. Delta owns stakes (or is in the process of acquiring stakes) in Aeromexico, Air France-KLM, China Eastern, Gol, Korean Air, and Virgin Atlantic.

While an equity investment isn’t really needed to have a close partnership, I imagine it does give them more power in these relationships.

Delta A330

Bottom line

I have to give Delta credit for their consistent strategy with equity investments in global airlines. They have some of the strongest partnerships in the world, and I imagine that’s thanks to a combination of their joint ventures and their investments.

While Northwest was strong in Asia back in the day, Delta was definitely a weaker player there. The Korean Air joint venture has allowed them to once again become a stronger player in Asia.

However, it hasn’t been all good news for passengers — Delta is heavily focused on funneling everyone through Incheon, and we’ve seen some point-to-point routes canceled, like Seattle to Hong Kong.

I’ll be curious to see if this investment leads to an even higher level of cooperation in the short term.

What do you make of Delta’s investment in Korean Air?

Comments
  1. Well I guess we can start the countdown-clock to when AS redemptions on KL will be terminated….

  2. Well, it’s extra time on travel for sure, but it’s not like ICN is the worst place to be stuck at.

  3. From the above quote “…best service and the finest experience connecting the U.S. with Asia.” Does this also offer the “…best service and the finest experience connecting South Korea with North America”? Is this more focused on what it gives DL flyers rather than KE flyers?

  4. Great strategy. I just wish that the knuckleheads running AA would do the same thing. They have only invested in China Southern as a last resort. There are so many joint ventures they could be doing and airlines that they could be investing in but they seem to still be trying to figure out how to run an airline.
    Simply pathetic management sometimes

  5. whoops wrote this in the wrong post! I believe Delta also has a joint venture with China Eastern…. and I’ll admit I’d much rather transit through ICN than PVG

  6. Unfortunately, for travelers used to great service and reasonable prices from a Korean airline. Now, if Delta has it’s way we will have the lesser quality service and more expensive flights.

  7. DL seems to be the only US airline that is using current profits to build to the future. At least they’re the only one that seems to be proactive rather than reactive.

  8. KAL cuts first class due to high debt levels, weak Won, and large drop in profit. Delta leverages KAL’s weakened position with cash infusion, basically telling them to expand their routes, giving Delta an Asian hub. KAL takes cash infusion orders 30 more 787’s. Profit?

    Is ok, KAL’s dead to me when they dropped Chase 🙂

  9. There was too much competition anyway, so less freedom and flexibility is ultimately good for the consumer.

  10. @armando it’s already begun – KL redemptions have been impossible for “technical reasons” for a few weeks and when I just searched again I noticed a lot of award space has already dried up.

  11. Horrible. We dont need US companies meddling.

    And for those that doesnt seem to know ICN is one of the best airports. Movie theater, free tours, ice skating rink, golf course, etc

  12. @wooootles Just curiosity, what makes you think “it’s not like ICN is the worst place to be stuck at” ?

  13. I do wonder if Virgin Australia is next on DL’s investment (taking either the HNA or EY stake) considering VS and VA about to apply for JV, undoubtedly under the instruction of DL (as VS’s half-owner and ‘ruler’)

  14. We will miss the flights on Delta metal all the way to SIN. Korean Air service is fine but their integration with the Delta IT systems is incomplete. Also, we have had long layovers in Seoul.
    We much prefer flying Delta from USA to NRT then onto SIN on Delta metal also. I understand that is expected not to be an option soon.

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