Delta, LATAM lay groundwork to implement joint venture

A white jet parked on airport ramp.

Delta Air Lines (NYSE: DAL) and LATAM Airlines Group (NYSE: LTM) moved a step closer to integrating operations with the signing Thursday of an agreement outlining how they will implement their joint venture agreement struck last September.

The airlines are anticipating U.S. and Chilean competition authorities will grant permission to coordinate in all areas of their business later this year. Shippers could benefit from the arrangement as much as passengers because of the combined reach of their networks, LATAM’s dedicated freighter fleet and greater efficiencies. 

Delta is investing $2.25 billion for a 20% stake in LATAM, the dominant carrier in South America, and in February launched their first code-sharing flights for Colombia, Ecuador and Peru. The collaboration on cross-selling passenger bookings was the first major step in aligning operations. With code-sharing, each airline can market flights operated by the other carrier on its own schedule, making it easier for passengers to find and schedule connections and earn miles. 

The airlines earlier this year also began offering reciprocal mileage benefits to frequent flyer members. And in early March, Delta was scheduled to co-locate its operations with LATAM’s hub at São Paulo’s Guarulhos International Airport.

Both companies said their commitment to the joint venture has not wavered despite the changes wrought on the airline industry by the coronavirus pandemic.

“While we remain focused on navigating the COVID-19 crisis and protecting the safety and well-being of our passengers and employees, we also have to look to the future to ensure the best possible customer experience and support the long-term sustainability of the group,” said LATAM Chief Executive Roberto Alvo in a statement. “Our bilateral strategic alliance with Delta remains a priority and we firmly believe that it still promises to offer customers the leading travel experience and connectivity in the Americas.”

Delta and LATAM are both heavily engaged in using passenger aircraft to transport urgently needed supplies for COVID relief efforts and regular commercial customers. Deploying idle assets for dedicated cargo operations is a revenue opportunity amid the collapse of air travel and gives shippers another outlet to move their goods during an equipment shortage. LATAM is among a growing number of international airlines that have been certified to put cargo in passenger seats to make flights more efficient.

Wednesday night a LATAM Boeing 787-9 passenger jet delivered the first batch of 240 million face coverings acquired by the government of Brazil to Guarulhos International Airport. The shipment contained 2,200 boxes. The Ministry of Infrastructure has contracted for 42 flights in total to transport 960 tons of surgical and N95 masks that will be delivered across the country, according to LATAM.

The LATAM flight originated in Shanghai, where cargo bottlenecks for personal protective equipment have reached epic proportions. Chinese authorities, however, are expediting certain mercy missions approved through special diplomatic channels.

The Ministry of Infrastructure has developed a logistics and distribution plan for the protective equipment focused on fast airlift, customs clearance and distribution to states.

LATAM said that in addition to the government effort, retailer Americanas is paying for two flights to transport 15 million masks for the Ministry of Health.