The joint venture between Delta Airlines and LATAM Airlines proposed last month, has analysts also seeing attractive opportunities to extend cargo reach, make money and benefit shippers.
Delta officials have not publicly discussed the potential to gain from each other’s cargo strengths and declined to make anyone available for an interview, saying it’s too early to discuss any plans. The reluctance to comment likely stems from both parties needing antitrust approval from U.S. and Chilean competition authorities before cooperating in any strategically meaningful way, which Delta CEO Ed Bastian said could take one to two years.
Until then, the partnership will be limited to code sharing, enabling each airline to sell seats on the other’s aircraft. Industry observers expect the joint venture to get the green light because the Delta and LATAM route networks don’t overlap much.
LATAM has 11 Boeing 767-300 freighters that supplement its passenger network and is scheduled to receive another converted passenger plane from Boeing next year. The carrier sold off its last two Boeing 777 freighters as part of a strategy to operate a uniform fleet with planes better suited for the Latin America market. The 777s proved too big for the seasonal fluctuations in goods and burned more fuel than the 767s, which give LATAM more operational flexibility in terms of routes and frequency, according to LATAM and industry experts.
Cargo represents 11% of LATAM’s annual revenue, or about $1.2 billion, compared to 2% for Delta. Last year, LATAM served about 5,000 customers and transported 921,000 tons of cargo, two-thirds of it on passenger planes, according to its annual report.
Delta, which is investing $2.25 billion for a 20% share of LATAM, had $865 million in cargo revenue in 2018. According to U.S. airline revenue data available on FreightWaves’ SONAR platform, Delta pulls in about $10 million to $12 million in cargo revenue in Latin America per quarter.
The joint venture is a good fit for Delta because it doesn’t have extensive service deep in South America, said a well-connected industry source who asked not to be named so as not to jeopardize ongoing professional relationships. Meanwhile, he added, South Florida could become an excellent hub for Delta and its European joint venture partners Air France-KLM and Virgin Atlantic to feed cargo to South America, and vice versa. Connections could also take place in Atlanta and New York.
Source: freightwaves.com