Oneworld Delta slap by LATAM – Delta takes a 20% bite of LATAM, who exits Oneworld
Well, this will shake up a few things!
North American Delta Airlines is taking a 20 per cent stake in South American airline LATAM.
No biggie of itself, except, this also means the end of the alliance between American Airlines and LATAM and will see LATAM withdraw from the Oneworld alliance which also has Australian airline Qantas as a member. That will mean that Oneworld no longer has an alliance member in South America.
What does it mean for Oneworld?
Oneworld (formed in 1999) has always been the poor cousin of the other major alliances: Star Alliance (formed in 1997) and Skyteam (formed in 2000). Depending on how you count it, Oneworld only has 13 members currently. It has an ‘associate’ (Oneworld connect) member (Fiji Airways), one is yet to become a full member (Royal Air Maroc) and one is leaving (LATAM). The other alliances are larger in terms of member airlines, with Skyteam having 19 members, and Star Alliance 27.
So with the loss of LATAM, Oneworld is losing a significant member and a presence on a major continent. They will be difficult to replace, as there is no competitor in the South American market that can rival LATAM. Most of the other possible contenders are already aligned – Avianca and Copa with Star Alliance, and Skyteam has Aerolineas Argentinas.
What does it mean for Qantas
Until LATAM and Oneworld announce a date for the exit of the airline, probably not a lot.
By agreement, Oneworld member airlines must give 12 months notice of their departure from the alliance, however, they can negotiate an agreement to vary this, so LATAM could leave earlier.
It’s not clear at this stage what will happen once LATAM exits the alliance. It is open for Qantas to raise a joint venture which would continue the alliance although outside Oneworld.
This will depend to some extent on what Delta Airlines want. If they decide LATAM should join their alliance (SkyTeam), then it’s likely to be the end of any arrangement with Qantas. If they are happy for LATAM to be without an alliance, then, it would be open for Qantas to create some kind of business relationship, joint venture or otherwise.
The big alliances are not as important as they used to be. Many airlines survive without them using strategic partnerships and joint ventures instead of membership of a major alliance. Virgin Australia and Emirates are two examples. Virgin has a relationship with Delta, for example, without being a member of SkyTeam, and Emirates has strategic arrangements with Qantas, as well as a range of other airlines from Alaska Airlines through to GOL in South America.
What does it mean for American Airlines
American Airlines applied for Joint Venture with LATAM, that would have consolidated their partnership. Unfortunately, a Chilean Supreme Court ruling nixed some important aspects of the proposed joint venture, a decision that may have contributed to the Delta/LATAM deal.
This leaves American currently without a significant alliance partner in South America. However, Delta will need to divest itself of its current stake in Brazilian airline GOL as part of the new deal, so this may open an opportunity for American.
There have been a number of reports that American is behaving like a jilted lover over this divorce, but, American has issued a clarification confirming that current tickets, baggage handling and lounge access will be honoured and that the breakup between American and LATAM will be orderly.
What does it mean for Delta
For Delta, this is fabulous! It gives them a substantial foothold in South America while slapping American Airlines face at the same time. They can tick this off their list in the quest for world dominance. All they need to do is form a relationship with one or more African airlines, and they basically have the world covered out of the USA.
Delta has a relationship with Virgin Australia, especially for add on flights within the USA, so it will be interesting if this impacts their agreement, or indeed their attitude towards joining a major alliance like SkyTeam.
What does it mean for LATAM?
Well other than a slight problem for their relationship with Qatar (CEO Akbar Al Bakar is no fan of Delta – calling their flight attendants ‘granny’!), there is little downside other than they lose their relationship with Oneworld, and probably with Delta competitor, Alaska Airlines.
They also get a cool 2 billion in investment, and Delta is taking over liability for some of their A350 orders, which should benefit them in the short term.
What a Qantas Frequent Flyer should do
If you were planning on travelling to South America using your Qantas frequent flyer points – then book early I say – you never know how long you will be able to redeem on LATAM via Oneworld.
You can still redeem on Qantas, to get to the continent, but who knows what you will be able to do on internal flights after LATAM exits Oneworld.
This is arguably disappointing for Australian travellers. Membership of the Oneworld alliance meant redeeming Qantas frequent flyer points on LATAM was easy, not to mention the access to baggage transfer, status recognition and airport lounges. I certainly took advantage of all these when travelling in South America for my honeymoon this year.
If you are planning travel to South America and are a member of a Oneworld frequent flyer scheme like Qantas – then go sooner rather than later, while LATAM is still a member of Oneworld, so you can accrue, or redeem points.
In the future – who knows, but it is entirely possible that if LATAM does not join another alliance, Qantas may still decide to create a relationship, which will give you at least some, if not all of the benefits gained by Oneworld membership.