Delta investing in airline partners is nothing new, as the airline owns stakes in Air France-KLM, China Eastern, LATAM, Virgin Atlantic, and more. The airline has now invested in yet another airline, but with a twist.
In this post:
Delta & Korean Air buy 25% stake in WestJet
Delta and Korean Air have announced plans to strengthen their respective partnerships with WestJet, through the purchase of minority equity stakes in the Canadian airline from Onex Partners (the upper middle market private equity platform of Onex, a Canadian investor and alternative asset manager).
As it’s described, these investments build on each airline’s existing relationship with WestJet, to provide further benefits to customers in North America, Europe, Asia, and beyond.
Under this agreement, Delta and Korean Air will independently acquire stakes totaling 25% in WestJet. Delta will invest $330 million for a 15% stake, while Korean Air will invest $220 million for a 10% stake.
It gets even more interesting. Upon closing, Delta also has the right and intent to sell and transfer a 2.3% stake in WestJet to its joint venture partner Air France-KLM, in exchange for $50 million. This transaction remains subject to certain Air France-KLM approvals.
Delta and Korean Air have both been codeshare partners with WestJet for years. The plan is for there to be an elevated partnership, with “more seamless travel experience for customers worldwide.”
Here’s how Delta CEO Ed Bastian describes this investment:
“Investing in a world-class partner like WestJet aligns our interests and ensures that we remain focused on providing a world-class global network and customer experience for travelers in the United States and Canada. Together, Delta and our airline partners are connecting the world and transforming the future of travel.”
Meanwhile here’s how Korean Air CEO Walter Cho describes this:
“We are pleased to invest in WestJet as part of our continued commitment to enhancing transpacific connectivity. This strategic partnership will enhance our global network and create long-term value for customers through greater choice and convenience.”
What’s the logic for this WestJet investment?
This partnership makes perfect sense in the context of how Delta does business. Delta takes a unique approach to its airline partnerships. If Delta wants to have a close partnership with another airline, it doesn’t just start a joint venture, but it also often acquires a stake in the airline, so that it’s fully invested.
Meanwhile Delta generally couldn’t care less about its non-joint venture and non-equity partners, which it almost views as a nuisance. With that in mind, WestJet has had an interesting arrangement with Delta for quite some time. Delta and WestJet had been pursuing a transborder joint venture, but it ended up being called off, due to too many concessions being required.
Nonetheless, Delta has clearly remained very interested in WestJet, and it has kept its “preferred” status with Delta, despite the lack of a joint venture. So I imagine that this has been in the works for quite some time, or else Delta wouldn’t have remained so interested (unrelated, but I’d similarly expect Delta to invest in EL AL, given its current relationship with the airline).
In and of itself, a minority stake doesn’t give Delta control over WestJet. However, Delta is a successful airline, and as you’d expect, airlines that Delta invests in are generally pretty cooperative with the airline. The interesting twist here is that Korean Air is also investing, and Air France-KLM is expected to acquire a stake in the future. Therefore this seems to be a global strategy for Delta and two of its closest partner airline groups.
So, what’s the strategy here? When you look at the current reality of aviation in Canada, you have Air Canada as the major global airline, and it’s part of the Star Alliance transatlantic joint venture. While WestJet has a respectable network, it has been heavily centered around Calgary (YYC), and the long haul network hasn’t necessarily been that big.
With Delta, Korean Air, and Air France-KLM, now investing in WestJet, what will that mean for the airline? Well, my guess is that the airline will focus its business model more around connecting to the hubs of those airlines, rather than being so Calgary centric. I also wouldn’t be surprised to see expanded long haul service.
WestJet already has a good amount of service to Delta hubs, and flies to Seoul Incheon and Paris Charles de Gaulle. However, don’t be surprised to see even more of a focus on this kind of flying, including out of additional Canadian airports. This seems like a win-win arrangement, which will increasingly allow WestJet to compete against Air Canada on a more global scale.
Bottom line
Delta and Korean Air have announced plans to invest in WestJet, acquiring a combined stake of 25%. A small part of that stake is expected to be sold to Air France-KLM. This is in line with Delta’s strategy of investing in its most important partners, and it means that we’ll likely see the airlines work even more closely together.
I feel like there’s a lot of upside here for WestJet, so I look forward to seeing how this evolves in the coming years.
What do you make of this WestJet investment?
SAS should become a preferred partner soon. Since they are partially owned by AFKLM, Delta has an indirect stake
Give us higher earning percentages on Skyteam airlines as well as redemptions on those airlines! Allow Westjet to join Skyteam!!!
So why don’t more airlines buy stake in airlines vs suggest mergers like JetBlue/United or JetBlue/Spirit which should not be allowed.
Delta might invest in El Al at some point but it will probably be after the war once the valuation on the airline goes down a bit. Right now they'd likely be investing at the airlines peak valuation
Interesting development as VS cut ties with WestJet in March;
Ive always wondered, why doesnt WestJet join Skyteam.
If Skyteam were to expand, I expected that LATAM, Etihad and Westjet would join, since those airlines had strong relations with skyteam carriers: LATAM WITH DETLA, Etihad with AF/KLM and WESTJET with DL.
But now, none of those seem likely to join Skyteam
The Etihad agreement with AF/KL was recently terminated about a month ago. Not sure why.
Qatar Airways has basically the same ownership stake as Delta in LATAM (10.05% to 10.03%) and continues its major OneWorld partnerships with Alaska, Iberia, British Airways, etc. i.e., almost everyone outside of AA. This basically makes it very unlikely they will ever fully join SkyTeam.
While Etihad now has no relationship with AF/KLM and with the Delta - Riyadh Air partnership is almost certainly no longer interested in building ties with SkyTeam. Technically Etihad also...
Qatar Airways has basically the same ownership stake as Delta in LATAM (10.05% to 10.03%) and continues its major OneWorld partnerships with Alaska, Iberia, British Airways, etc. i.e., almost everyone outside of AA. This basically makes it very unlikely they will ever fully join SkyTeam.
While Etihad now has no relationship with AF/KLM and with the Delta - Riyadh Air partnership is almost certainly no longer interested in building ties with SkyTeam. Technically Etihad also partners with American, but it's likely they will be the odd one out of the ME3 with Qatar in OneWorld and Emirates moving towards Star Alliance with SkyTeam likely getting Riyadh Air + Saudia.
I think WestJet very likely joins SkyTeam eventually.
I’m not really seeing any mention of potential Skyteam membership - is that not something we see as likely? I know Delta partnership isn’t definitely a sign of Skyteam membership, but looks like all Skyteam major airlines are getting involved here.
Not sure about moving away from Calgary given the large subsidies from the Alberta government to have Weather concentrate its operations in YYC, which moved most of the long hauls from YYZ and not everyone wants to connect to Europe on 737’s via YYT/YHZ. Unless westjet orders more 787’s this feels more like a defensive move to retain their position in the Canadian market. I do hope this means an increase in Tier 2 Canadian...
Not sure about moving away from Calgary given the large subsidies from the Alberta government to have Weather concentrate its operations in YYC, which moved most of the long hauls from YYZ and not everyone wants to connect to Europe on 737’s via YYT/YHZ. Unless westjet orders more 787’s this feels more like a defensive move to retain their position in the Canadian market. I do hope this means an increase in Tier 2 Canadian cities trans border flying. Eg. the recently reinstated YXE-MSP and YWG-ATL
100% this.
I believe they are tied to Calgary for the foreseeable future, given the 2022 agreement they signed with Gov of AB.
I mean this was pretty obvious.
There were tons of codeshare agreements between WestJet and SkyTeam airlines like KE, VS, DL, etc.
WestJet and DL were pursuing a transborder JV at some point, but then had to scrap it due to anti-trust, I'd imagine we see that comeback at some point with these acquisitions.
I can say with certainty that DL is not pursuing an investment in EL AL…too political, it would be too much of a reputation risk.
you have to think that the real strategic change would be for WestJet adding more service from Eastern Canada given that is where most Canadian international travel originates/terminates and also where DL is stronger.
KE provides a platform for WestJet to grow across the Pacific.
Canadian airlines - including AC - benefit from the weak CAD and strong USD, allowing them to undercut US carriers. DL and KE certainly want to have a piece of that "undercutting"
WestJet used to have an extensive network in eastern Canada but reduced that during the pandemic when it repositioned to Calgary and focused on western Canada. WestJet still has some flights out of Toronto but doesn't even have a lounge there.
Ben Smith, CEO of Air France has been on the board of West Jet for years. I think he went on the board as soon as he left Air Canada.
I feel like this is the third or fourth time in 6 or 7 years that I've read something about Delta and WestJet. I suspect Delta thinks the new Trump administration won't block any kind of partnership or investment. Perhaps they also think aviation liberalization will be a part of any new US-Canada trade agreement. Of course, this comes at a time when WestJet is cutting US routes -- routes Delta doesn't serve. The biggest...
I feel like this is the third or fourth time in 6 or 7 years that I've read something about Delta and WestJet. I suspect Delta thinks the new Trump administration won't block any kind of partnership or investment. Perhaps they also think aviation liberalization will be a part of any new US-Canada trade agreement. Of course, this comes at a time when WestJet is cutting US routes -- routes Delta doesn't serve. The biggest problem with a Delta and WestJet partnership is the fact that WestJet has all but abandoned eastern Canada.
Well technically Ontario is Central Canada. Eastern Canada is Quebec. New Brunswick, PEI, Nova Scotia and Newfoundland & Labrador
What a load of rubbish. WestJet hasn’t “abandoned” Eastern Canada. Typical yank perspective.
As a Canadian based in Montreal, I think this is really good news. As much as I love AC, there needs to be increased competition. West Jet and Air Transat are just way to small compared to AC and lack the global network.
I think was very necessary, Canada doesn't really have enough population to sustain multiple competitive carriers without foreign investment stakes.
Canada is pretty similar to Australia in that you have two large land masses that require flying to connect, but relatively low population density. Virgin Australia has largely been on life support for the past decade tbh.
I've flown the WestJet business pods to Tokyo before and was pleasantly surprised by the high quality service...
I think was very necessary, Canada doesn't really have enough population to sustain multiple competitive carriers without foreign investment stakes.
Canada is pretty similar to Australia in that you have two large land masses that require flying to connect, but relatively low population density. Virgin Australia has largely been on life support for the past decade tbh.
I've flown the WestJet business pods to Tokyo before and was pleasantly surprised by the high quality service and food, I really think they could be doing more, but their 787s are so densely configured, they only have 4 rows of business class.