The US Department of Transportation (DOT) has tentatively approved a proposed joint venture between Delta Air Lines and LATAM Airlines Group, more than two years in the making, but places certain conditions on final antitrust immunity for the deal.
The joint venture, which the companies have been pursuing since mid-2019, was approved by Chilean competition authorities in October 2021.
“The Department proposes the following critical remedies and conditions to address these issues: maintenance of current third-party interline agreements, the removal of exclusivity provisions,…a 10-year expiration and reassessment requirement, and the removal of a capacity constraint clause located in the joint venture agreement, which artificially limits growth during the initial stages of the proposed relationship,” the DOT writes in an order published on 23 June.
“With these conditions, we have tentatively determined that the alliance is likely to generate public benefits while the US-South America market would remain sufficiently open to existing and new competition,” it adds.
According to the filing, interested parties now have 14 days to respond to the tentative decision.
The two airlines, which have spent more than two years planning and preparing for the JV, express relief at the decision.
”LATAM Airlines Group and Delta Air Lines applaud the US Department of Transportation’s tentative decision to approve their joint venture between the US/Canada and South America (Brazil, Chile, Colombia, Paraguay, Peru, and Uruguay) that will vastly improve travel options and service for customers traveling between the two regions,” the companies say in a joint statement.
”Once the DOT finalises its decision, both airlines will work to quickly deliver the consumer benefits approval unlocks, including expanded capacity, increased routing options between the US/Canada and South America, superior frequent flyer benefits and shared airport facilities and amenities,” they add.
In September 2019, Delta announced it would be taking a 20% stake in the Latin American carrier worth $1.9 billion. At that time, LATAM said it would be leaving the American Airlines-dominated Oneworld alliance, of which it had been a member for 20 years. That deal came after a Chilean court stopped a potential joint venture with Fort Worth-based American earlier that year.
In December 2019, Delta and LATAM said they would begin code-sharing for flights operated by certain LATAM affiliates in Colombia, Ecuador and Peru in the first quarter of 2020.
The two airlines signed a joint venture agreement in May 2020 and regulatory authorities in Colombia, Brazil and Uruguay subsequently approved the proposal.
The carriers applied to the US DOT for blanket approval to operate code-share routes within each others’ networks on US-Chile routes, and also to third countries, in July 2020.
The joint venture allows the carriers to operate flights under each other’s identification between, within and beyond the airlines’ two home countries. The deal also covers flights operated by Delta Connection’s US regional affiliates SkyWest Airlines, Republic Airways and Endeavor Air.
The two carriers had also introduced loyalty programme reciprocity, and they are co-located in the same terminals at some of their most important global hubs.
The JV approval comes just days after LATAM Airlines’ restructuring plan following its voluntary Chapter 11 bankrutcy protection process secured court approval.
On 18 June, LATAM said the reorganisation plan had been backed by “nearly all” of its creditors, following months of negotiation and mediation which “bore fruit”. At the time, LATAM called the approval “a very important step” and says the plan will involve injecting about $8 billion into the company, including the $5.4 billion finance package, through a capital increase, and the issue of convertible bonds and new debt.