Delta Air Lines Plans to Increase Stake in Aeromexico • Delta said it intends to acquire as much as an additional 32% stake in the Mexican airline

Delta Air Lines Inc. said it intends to acquire as much as an additional 32% stake in Grupo Aeromexico SA B at a 52% premium, in a deal that aims to strengthen the alliance between the carriers.

Delta intends to acquire the additional shares for 43.59 Mexican pesos ($2.60) each, while Grupo Aeromexico’s stock recently traded at MXN28.74, according to FactSet.

The Atlanta company currently has a 4.1% stake in Grupo Aeromexico and holds an option to acquire an additional 8.1% of the carrier. The Delta pension trust holds options to acquire 4.6% of the company.

After the transaction, Delta and Delta pension trust would own or have options to acquire as much as a 49% stake in Grupo Aeromexico.

Delta and other carriers pursue international partnerships because a web of bilateral air treaties limits their ability to fly on their own within foreign countries. The deals range from basic code-sharing pacts—where airlines list each other’s flights on their reservation systems—to full-scale joint ventures that have antitrust immunity, so the partners can jointly set prices and schedules and share revenue.

Delta has the largest international network among U.S. carriers measured by traffic.

In March of 2015, Delta and Grupo Aeromexico filed for antitrust immunity in an effort to compete on routes between the U.S. and Mexico via a planned $1.5 billion joint venture.

Approval by both countries would allow the carriers to align their networks and scheduling while sharing costs and revenue on flights between the U.S. and Mexico.

Delta and Aeromexico launched their first code-share arrangement more than 20 years ago and entered an enhanced commercial agreement in 2011.

In 2012, Delta invested $65 million in Grupo Aeromexico, the parent company of Aeromexico. The two together offer about 4,000 weekly code-share flights. 

- Source:  http://www.wsj.com