Delta Air Lines is investing up to $1.2 billion in three of its foreign airline partners — Virgin Atlantic, Aeromexico, and Latam Airlines Group — as those carriers emerge from bankruptcy and restructuring. The move is a sign that Delta is betting that its pre-pandemic international expansion plan is a winner as travel emerges from the Covid-19 pandemic.
Delta, in a filing with the U.S. Securities and Exchange Commission (SEC), said it aims to have a 20 percent stake in Aeromexico, a 10 percent stake in Latam, and maintain its 49 percent stake in Virgin Atlantic as each airline emerges from restructuring. Latam and Aeromexico recently submitted their restructuring plans as they begin to exit the U.S. Chapter 11 bankruptcy process; Virgin Atlantic began restructuring in the UK last year.
“Throughout the pandemic, Delta has continued to invest in our future, including new aircraft orders, accelerating real estate projects and putting significant resources into health and safety measures to protect our employees and our customers,” said Executive Vice President and Chief Financial Officer Dan Janki said in the carrier’s filing. “Similarly, investing in our partners now – even as we continue to navigate the pandemic – is the right choice to support Delta’s long-term strategy.”
Delta did not specify how much it would invest in each carrier. However, at Aeromexico and Latam, which are separately restructuring through the U.S. Chapter 11 bankruptcy process, it is taking steep cuts to its equity stakes. Prior to their restructurings, Delta had a 51 percent stake in Grupo Aeromexico — or a 49 percent voting share to keep with foreign control restrictions — and a 20 percent stake in Latam. Delta’s reiteration of its support for its Latin American partners comes after several challenges to its equity positions in the airlines, including from creditors at Aeromexico — since settled with Delta retaining a 20 percent stake — and an aborted takeover bid by Azul for Latam.
At Virgin Atlantic, the airline said it is getting £400 million ($530 million) from both the Virgin Group and Delta. The Virgin Group will contribute 51 percent of the total, while Delta will kick in the remaining 49 percent. The new funds will go toward paying down debt and increasing Virgin Atlantic’s liquidity, the airline said.
Virgin Atlantic partners with Delta, as well as Air France and KLM, in the lucrative transatlantic market. Bookings soared after November 8, when the U.S. reopened to vaccinated travelers, and bolstered by strong demand, Virgin Atlantic now expects to be profitable by 2023.
The pandemic did already ailing Virgin Atlantic no favors, raising questions about its very survival. By the time it began restructuring in the UK last year, it had laid off thousands of employees, retired its fleet of iconic Boeing 747-400s, pared back its route network, and ended operations at London Gatwick, which had been one of its most important airports.
“Our story has been well documented during the pandemic,” Virgin Atlantic CEO Shai Weiss said in a statement. “Throughout, our shareholders Virgin Group and Delta Air Lines, and our creditors, have been a source of unwavering support.”
“Virgin Atlantic’s business has transformed, allowing them to emerge from the pandemic a stronger airline,” Delta CEO Ed Bastian added. “Together, more customers will be able to take advantage of the many benefits our strategic partnership offers, including a route network serving more than 350 cities in North America, Europe and the UK.”