Delta Airlines has been creating strategic investments over the past few years. With acquisitions of parts of China Eastern, GOL, Aeromexico and Virgin Atlantic, the airline now has a diversified portfolio of carriers. Well, it seems that Delta is not just leaving it there. Delta announces a new partnership today with Air France-KLM.
Delta has announced their intent to buy 10% of stock in Air France-KLM for about 375 million euros. This means that Delta will now own a stake in one of the largest carrier groups in the Skyteam alliance. Delta has had a joint venture with AF-KLM since 2009, and now they will add Alitalia to the mix. This means that they not only see hope in Alitalia, but that they see them as a strategic partner. This will help them better compete in the transAtlantic market. Their biggest competitor is American and IAG. IAG controls Iberia, British Airways and Aer Lingus.
Air France-KLM Buys 31% of Virgin Atlantic
To add to the buying frenzy, AF-KLM is also buying 31% of Virgin Atlantic. This means the Virgin Group will own 20%, with Delta the largest shareholder at 49%. Virgin Atlantic will be included in the transAtlantic joint venture. This addition makes it logical for Virgin to join Skyteam in the near future.
What do I make of this?
I am not surprised that Delta continues to expand their portfolio. I am very surprised , however at two events. First, the fact that AF-KLM is purchasing a stake in Virgin Atlantic is shocking, and there must be some bigger picture that I am missing. As an add-on to this, I am surprised Richard Branson sold of 31% of the shares of Virgin Group. Secondly, I am surprised that Alitalia has joined the JV between the other mentioned carriers. This means that they have a viable way out of their dire situation. Maybe Delta will buy them out? Who knows.
Strategic investments are crucial at this point in the airline industry. Delta is ahead of the pack, with investments in various airlines, and interests in Jet Airways. United has strategic interests with Avianca, and American is possibly going to purchase a stake in China Southern. This seems to be the new normal for the major carriers of the world. It may not be very successful however. Etihad was a pioneer in this game, and they lost $1.87 billion. Time will tell if these investments pay off. Hopefully, these changes will mean better experience for consumers.
What do you think? Did Delta do a good deal? What about AF-KLM? Let us know!
All images from Wikipedia.