After a quarter-century at the carrier's helm, Latam Airlines Group CEO Enrique Cueto Plaza this year announced that it would be his last, as he will step down on March 31, 2020. He already had played a major role in creating Latin America's largest airline group, having led Latam since the LAN-TAM merger of 2012 and previously serving as LAN CEO since 1994. Within a few weeks of announcing his departure, he had one more industry-shaking deal to announce.
Latam and longtime Oneworld partner American Airlines had been trying to establish a joint venture but hit a snag this year when Chile's Supreme Court issued a ruling that blocked it in that country. While the alliance could have continued without Chile, which American itself said "would have provided limited upside," Latam instead found a new partner in Delta Air Lines. To sweeten the deal, Delta plans to invest $1.9 billion to acquire a 20 percent stake in Latam. Delta also plans to acquire 14 Airbus A350 aircraft that Latam either owns or has committed to buy. Delta, in turn, is getting a seat on Latam's board of directors.
The deal will require regulatory approval, but the carriers are optimistic given that Delta and Latam's networks have little overlap.
For Delta, having Latam as a partner solves what SVP of global sales Bob Somers called its biggest global coverage gap, South America. Somers called the move Delta's biggest investment since its 2008 merger with Northwest and its biggest network move since its acquisition of Pan Am's transatlantic routes in 1991.
As a result of the agreement, Latam next year will exit the Oneworld alliance, leaving Oneworld as the only global alliance lacking a Latin American carrier. American Airlines, which has had the largest network in South America among U.S. carriers, in particular is losing a major codeshare partner, though it already has announced the bulking up a few of its routes to the region and is looking for new partners. Brazilian carrier Gol, in which Delta had a stake that it now will divest as a part of its new partnership with Latam, is a likely candidate to pair up with American.
Latam, meanwhile, appears to be forging its own strategy on building alliances. Even as it teams up with Delta, it has made no indication that intends to join the SkyTeam alliance. In fact, executives have indicated they intend to keep relationships with some of their soon-to-be former Oneworld allies, including British Airways and Qatar Airways. An airline that has not been on the friendliest terms with Delta in recent years, Qatar also has a 10 percent stake in Latam, and CEO Akbar al-Baker said he was considering increasing that following the Delta announcement.