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.
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?