Will Skyteam become DeltaTeam?

Delta Airlines has announced a 4.3% stake in Hanjin KAL, the parent company of Korean Air. A small investment to strengthen ties with the South Korean carrier with which it set up a joint venture last year? Yes…but not only.

A helping hand to the owners of Korean

The first thing to know is that the current owners of Korean are facing some activist investment funds within their capital and that by taking 4.3% of the capital Delta helps them to better defend their rights against hedge funds.

A little help but certainly not disinterested: it is also its joint venture with Korean that Delta is protecting. In addition, once the required approvals have been obtained, Delta could go up to 10%.

Delta: a proactive approach to joint ventures

Korean is not the only airline with which Delta has entered into a joint venture. The airline has done the same with Air France-KLM, Virgin Atlantic, Aeromexico, WestJet, …..

Joint ventures are a very effective way for airlines to strengthen their presence in a market while coordinating their programs and prices, beyond simple codesharing.

But unlike other airlines, Delta has a very proactive approach to these devices. The airline not only co-invests with its partners but also likes to invest in its partners.

Delta now owns 4.3% and soon 10% of Korean Air’s parent company.

But the Atlanta-based airline also owns 10% of Air France and 40% of Virgin Atlantic (knowing that Air France also owns 40% of Virgin Atlantic), 32% of Aeromexico (with an option to increase to 49%), 12% of Gol, 3.55% of China Eastern and remains in the running to take over Alitalia.

What all these airlines have in common is that they are members of Skyteam (Air France-KLM, Korean, Alitalia, China Eastern), are close to joining the alliance (Virgin Atlantic) or are very close partners of the alliance (Gol).

A new balance within Skyteam

When Aeromexico, Air France, Delta and Korean announced the birth of Skyteam on June 22, 2000, the relationship was not really equal but almost. Throughout the expansion of the alliance, the leaders have remained the same.

It must now be recognized that with its ability to influence the governance of a number of member airlines, and not the least, Delta is transforming the balance of power in the alliance.

By building joint ventures in an opportunistic way (knowing that a good partnership is better than a bad alliance) and by doubling them with an equity stake in its partners (in a more inspired way than Etihad), Delta is building an industrial tool that is, in our opinion, as interesting as the alliance itself.

When the future of Air France was in question, TravelGuys believed that Delta was the best possible buyer. And we still think so, even if Air France is doing less badly. Delta remains in pole position for the acquisition of Alitalia.

Delta: the real boss of Skyteam?

The truth is that within the alliance only Delta has broad enough shoulders to carry out buyouts, take stakes and participate in the inevitable consolidation of the sector.

So yes, Air France-KLM has taken 40% of Virgin Atlantic but this operation is only due to the fact that Delta could not take the majority of the British carrier and was only possible by the contribution of new money coming from Delta and China Eastern in return for 10% of the capital of Air France-KLM for each!

It will not be surprising in the future to see the economic model of the alliance’s member airlines increasingly organized around partnerships with Delta rather than within an alliance that seems to us to be losing momentum, continues to vegetate without expanding and whose recent shift from a network to an alliance based on customer experience and technology seems unreadable and more like a smoke screen than anything else.

Photo : A350 Delta Airlines by viper-zero via Shutterstock

Bertrand Duperrin
Bertrand Duperrinhttp://www.duperrin.com
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.
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