Note: This article mistakenly reported the confirmation that LATAM will join the SkyTeam airline alliance, which has not occurred. We regret any inconvenience this article may have caused, and it has been since edited.
The SkyTeam alliance of airlines has had some interesting activity recently due to the announcements of new partnerships: Air Europa with the parent company of British Airways; and LATAM with Delta Air Lines — and the regions to be affected most by the changes are Latin America and Europe.
SkyTeam Alliance: Air Europa to Leave; LATAM to NOT Join at This Time
International Consolidated Airlines Group officially announced the agreement between its wholly owned subsidiary — which is IB OPCO Holding S.L. and better known as Iberia — and Air Europa to acquire the airline for one billion euros in cash.
Air Europa is the third-largest airline in Spain after Iberia and Vueling Airlines — both of which operate airport hubs in Madrid and Barcelona respectively; and are already part of the portfolio of airlines of International Consolidated Airlines Group, which also includes British Airways, Aer Lingus and LEVEL. As with Iberia, the main hub airport of Air Europa is Madrid–Barajas Airport; and this deal is expected to strategically transform that airport “into a true rival to Europe’s four largest hubs: Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle” which will likely strengthen routes between Europa and Latin America — as well as possibly become “a gateway between Asia and Latin America.”
Air Europa currently operates scheduled domestic and international flights to 69 destinations — including within Europe — as well as long-haul routes to Latin America, the United States of America, the Caribbean and North Africa. Air Europa generated revenue of €2.1 billion and an operating profit of €100 million in 2018. It carried 11.8 million passengers in 2018 and ended the year with a fleet of 66 aircraft. Although its operations will be integrated into the existing hub structure of Iberia at Madrid–Barajas Airport, Air Europa will remain a standalone airline for the foreseeable future.
The deal — which is expected to be completed sometime next year — will not only offer “significant synergy potential in terms of cost and revenue”; but it is expected to also once again establish International Consolidated Airlines Group “as a leader in the highly attractive Europe to Latin America and Caribbean market.”
Customers are expected to significantly benefit from this deal, which will purportely provide “increased choice and schedule flexibility and greater opportunities to earn and redeem miles.” This includes the eventual earning and redemption of Avios with flights operated by Air Europa…
…and because most of the airlines of International Consolidated Airlines Group participate in the oneworld airline alliance, Air Europa will eventually leave the SkyTeam airline alliance — but this does not necessarily mean that Air Europa will become a member of the oneworld airline alliance, as no definitive announcement pertaining to that has been released at the time this article was written.
The European Commission cleared the €1.36 billion acquisition of a stake of 30 percent of Aer Lingus by International Consolidated Airlines Group from Ryanair in July of 2015.
Delta Air Lines to Invest in LATAM
Meanwhile, Delta Air Lines officially announced on Thursday, September 26, 2019 that the airline has entered into a strategic partnership in which it will invest $1.9 billion for a 20 percent stake in LATAM Airlines Group S.A. through a public tender offer at $16.00 per share, to be funded principally with newly issued debt and available cash.
The partnership is expected to result in both airlines holding “the leading position in five of the top six Latin American markets” from the United States while serving “435 destinations worldwide and carry more passengers between North America and Latin America than any other partnership.”
As with the acquisition of Air Europa by International Consolidated Airlines Group, customers are expected to “benefit from significantly expanded travel choices” — especially across North America and South America — and experience “an industry leading customer experience” in the form of “greater customer convenience, a more seamless travel experience and better connect customers with the rest of the world.”
The strategic partnership is expected to build upon the global footprint and joint ventures of Delta Air Lines and LATAM worldwide, which includes the existing partnership Delta Air Lines has with Aeroméxico. This partnership also means that LATAM will leave the oneworld airline alliance and may eventually become a member of the SkyTeam airline alliance — but the latter part of that statement has not been confirmed at the time this article was written.
The tender offer and the strategic partnership are subject to customary closing conditions and all required governmental and regulatory approvals, including anti-trust immunity.
Additional details of the partnership include that Delta Air Lines will:
- Also invest $350 million to support the establishment of the strategic partnership.
- Acquire four Airbus A350 aircraft from LATAM and has agreed to assume the commitment by LATAM to purchase 10 additional Airbus A350 aircraft to be delivered beginning in 2020 through 2025, supporting the ongoing fleet transformation of Delta Air Lines.
- Be represented on the Board of Directors of LATAM, which will further strengthen the relationship between the two airlines
According to this official announcement by LATAM pertaining to the new partnership, “LATAM expects the transaction will improve free cash flow generation, reduce forecasted debt by over $2 billion by 2025 and improve LATAM’s capital structure, enhancing its ability to execute its long-term strategy.”
Summary
Despite the announcements of the newly-formed partnerships, neither Air Europa nor LATAM are confirmed to join the oneworld and SkyTeam airline alliances respectively in the foreseeable future.
I have flown as a passenger on an airplane operated by Air Europa only once; and that was aboard a Boeing 737-800 aircraft from Madrid to Amsterdam early in the morning back on Wednesday, October 8, 2014 as part of my unintentional trip around the world, which is a series of articles I have yet to finish.
The flight was uneventful and nothing special — so much so that I did not even write an article reviewing my experience.
As for LATAM, my only experiences as a passenger was my first time aboard a Boeing 787-9 “Dreamliner” airplane traveling from Santiago to Easter Island — as well as the return flight. Yes, I still have the series of articles pertaining to my trip to Easter Island to finish as well.
Although customers may benefit overall from these new partnerships, they also could possibly have fewer choices as well on affected routes, which could mean more expensive airfares…
…but only time will tell, as you will never hear from the marketing departments of airlines as to how customers will be adversely affected by the new partnerships.
All photographs ©2014 and ©2019 by Brian Cohen.
