Delta plans 49% stake in Aeromexico

18 Nov 2015 by Tom Otley

Delta Air Lines has announced its intention to acquire up to a 49 per cent stake in Grupo Aeromexico, the parent company of Aeromexico.

The US carrier already owns approximately 4.1 per cent of the outstanding shares of Grupo Aeromexico and holds an option to acquire an additional 8.1 per cent. Separately, the Delta pension trust holds options to acquire approximately 4.6 per cent of Grupo Aeromexico.

Today's announcement will see Delta increase its current ownership in Grupo Aeromexico by an additional 32 per cent.

Following completion of the tender offer, Delta and the Delta pension trust collectively would own and/or have options to acquire up to a total of 49 per cent of the outstanding shares of Grupo Aeromexico.

Ed Bastian, Delta's president, said: "This new investment demonstrates Delta's confidence in Mexico's future and deepens our relationship with Aeromexico, cementing Delta's long-term commitment to the customers we serve to, from and through Latin America.

In March, Delta and Aeromexico filed an application with the US Department of Transportation seeking antitrust immunity for a new joint venture on flights between the US and Mexico. The request was also submitted for approval to the Mexican antitrust authorities, the Comision Federal de Competencia Economica (Federal Economic Competition Commission).

As reported by Bloomberg at the time, the move would boost flight options for travellers between Mexico and the US.

In a filing to the Mexican stock exchange, Andres Conesa, Aeromexico CEO, said: "Passengers will be able to reserve, buy and fly interchangeably between both airlines. The potential to combine and align our networks and scheduling will offer our clients a better product than what they'd get individually."

The move is similar to Delta's acquisition of 49 per cent of Virgin Atlantic (see news, April 2013) and its acquisition of a stake in China Eastern (see news, July 22).

Currently, Delta and Aeromexico offer a total of 103 codeshare destinations that represent more than 900 daily flights in six countries. The carriers collectively operated 93 codeshare flights when the agreement started in 1994.

A timeline of Delta's partnership with Aeromexico

  • 1994 - Delta and Aeromexico sign a commercial cooperation agreement.
  • 2000 - Delta and Aeromexico co-found SkyTeam, now a 20-airline alliance.
  • 2006 - Delta signs maintenance services alliance with Aeromexico (MRO in Guadalajara).
  • August 2011 - Delta and Aeromexico announce an agreement for a long-term, exclusive commercial alliance. Delta invests $65 million in Aeromexico, which represents 4.17 per cent of its shares and allows Delta to have a seat on the board of directors.
  • June 4, 2012 - Grupo Aeromexico receives $65 million from Delta as part of the carrier’s investment in Mexico's flagship carrier’s capital stock. The investment creates the leading airline alliance between Mexico and the United States.
  • August 2012 - Delta and Aeromexico announce a plan to begin the construction of a jointly operated aircraft maintenance, repair and overhaul (MRO) center at Queretaro Intercontinental Airport.
  • March 2014 - Delta and Aeromexico inaugurate TechOps Mexico, located near the International Airport of Queretaro. Both airlines invest $27.5 million, $55 million total, to build the largest service center in Latin America with the capacity to serve nine aircrafts simultaneously.
  • March 31, 2015 - Delta and Aeromexico file antitrust immunity application. The application marks a significant step in the creation of a $1.5 billion joint venture that will allow Delta and Aeromexico to compete more effectively on routes between the US and Mexico.

Tom Otley

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