Delta Air Lines announced this week that it is investing $1.9 billion for a 20% stake in LATAM Airlines. One of the most notable consequences — other than immediately creating a partnership which will be the largest player in South America — is LATAM also informing Oneworld that it will cease to be a member. Nor will LATAM be joining Skyteam, of which Delta is a leading light.
Oneworld member American Airlines will remain the largest (in terms of number of flights) US carrier operating in South America. Although American will still be able to offer its corporate clients good access to South America — indeed its upping its frequencies to Lima, SÃ£o Paulo and Santiago — it leaves the rest of the Oneworld hitherto global alliance without a codeshare partner on the continent of South America. This year the alliance celebrated its 20th anniversary.
Delta and LATAM are describing their tie-up as a partnership with ambitions to become a joint venture.
All buyers should be aware that such bilateral partnerships are beginning to eclipse global alliances as aviation's favoured means to gain more access to favoured, ie profitable, markets.
Its tie-up with Virgin Atlantic means that Delta is no stranger to the partnership model. LATAM is also no newcomer. It has partnerships with Qantas to give it access to Australia (and Qantas access to South America) and Qatar, which is also a 10% owner of LATAM. Nonetheless, LATAM leaving Oneworld cuts off European access to a large and growing business travel market.
LATAM claims it wants to remain independent and have strategic partnerships with carriers that can add strategic value. That means it certainly is going to want direct access to European destinations. That might very well be via a partnership with Air France-KLM but the betting is probably on one with IAG. Oneworld member Iberia's Madrid hub has long served as the gateway to onward European connections for Latin American businesses.
LATAM moreover is important for European travel managers. Its continent-wide route network makes it the leading carrier for business travellers within South America (GOL's network is strong in Brazil but not elsewhere and it still labels itself a 'low-cost' carrier).
Times are changing. Airline alliances once took over from interlining and codeshares but bilateral partnerships are now on the ascendancy.
Alliances were good news for corporate travel managers. A single deal with an alliance rather than different contracts with different member carriers was the holy grail. But such deals were elusive. Barriers to alliance-wide contracts ranged from legal restrictions in some countries on contracts raised in other jurisdictions to how airline sales team incentives and bonuses were structured.
But corporate deals are now waning — best price on the day, fare ceilings and corporate travellers' booking their own travel are all increasing.
Politics geeks will have seen a trend for countries to look for individual trade deals rather than be 'constrained' by being within a block of nations.
That same trend seems to be alive and well in aviation.