Delta Air Lines New Shareholding In LATAM Airlines Group Could Become Complicated With Libertad Act Lawsuit(s)

On 26 September 2019, Atlanta, Georgia-based Delta Air Lines (2018 revenues approximately US$44 billion) reported the intention to acquire a 20% shareholding in Santiago, Chile-based LATAM Airlines Group (2018 revenues approximately US$10 billion).  Delta Air Lines will become the third-largest shareholder in LATAM Airlines Group. 

On 25 September 2019, LATAM Airlines Group and Fort Worth, Texas-based American Airlines Group (2018 revenues approximately US$44 billion) were sued in United States District Court by an individual who claims ownership of the Jose Marti International Airport (HAV) in Havana, Republic of Cuba.   

The law firm representing the plaintiff has confirmed that approximately forty-nine (49) other airlines have been notified that they may be subject to litigation.  Link to post:  https://www.cubatrade.org/blog/2019/9/25/rivero-mestre-files-helms-burton-act-lawsuit-against-american-airlines-on-behalf-ofnbsprightful-owner-ofnbspjos-mart-international-airport-seeks-treble-damages 

Delta Air Lines operates flights from the United States to HAV, so the company may be subject to litigation.  Delta Air Lines would be expected to respond to litigation relating to the flights that it operates to HAV in a similar way as did American Airlines to The Wall Street Journal on 25 September 2019: 

“American Airlines service to Cuba including José Martí International Airport in Havana is authorized by the U.S. government including the Department of Transportation and the U.S. Office of Foreign Assets Control,” Joshua Freed, a spokesman for American Airlines, said on Wednesday. “We’ll review this lawsuit in detail and vigorously defend our service to Cuba.”   

Delta Air Lines may be subject to and impacted by litigation against LATAM Airlines Group relating to its shareholding in LATAM Airlines Group, which may not be able to use the same defense of operations as cited by American Airlines.  LATAM Airlines Group has assets in the United States that could be subject to attachment should the plaintiff prevail in court.

Excerpts:

“Delta and LATAM Airlines to form the leading airline partnership throughout the Americas
September 26, 2019

Partnership brings together the leading airlines in North America and Latin America, connecting the Americas to the world as never before 

Together, Delta and LATAM will hold the leading position in five of the top six Latin American markets from the U.S. 

Together, the partners will serve 435 destinations worldwide and carry more passengers between North America and Latin America than any other partnership 

Customers will benefit from significantly expanded travel choices across the Americas and an industry leading customer experience 

ATLANTA and SANTIAGO, CHILE, Sept. 26, 2019 — Delta (NYSE: DAL) and LATAM Airlines Group S.A. (NYSE: LTM; IPSA: LTM) (“LATAM”) today announced that they have entered into a strategic partnership that for the first time combines the strengths of the leading airlines in North and Latin America.

“This transformative partnership with LATAM will bring together our leading global brands, enabling us to provide the very best service and reliability for travelers to, from and throughout the Americas,” said Ed Bastian, Delta’s chief executive officer. “Our people, customers, owners and communities will all benefit from this exciting platform for future growth.” 

“This alliance with Delta strengthens our company and enhances our leadership in Latin America by providing the best connectivity through our highly complementary route networks,” said Enrique Cueto Plaza, chief executive officer of LATAM. “We look forward to working alongside one of the world’s best airlines to enhance the travel experience for our passengers.”

The strategic partnership will unlock new growth opportunities, building upon Delta’s and LATAM’s global footprint and joint ventures worldwide, including Delta’s existing partnership with Aeroméxico. With their complementary networks, Delta, LATAM and their partners will be able to offer access to a greatly expanded array of worldwide destinations. Together, the partnership will provide greater customer convenience, a more seamless travel experience and better connect customers with the rest of the world.  Additional details of the partnership include: 

Delta will invest $1.9 billion for a 20 percent stake in LATAM through a public tender offer at $16 per share, to be funded principally with newly issued debt and available cash. 

Delta will also invest $350 million to support the establishment of the strategic partnership. 

Delta will acquire four A350 aircraft from LATAM and has agreed to assume LATAM’s commitment to purchase 10 additional A350 aircraft to be delivered beginning in 2020 through 2025, supporting Delta’s ongoing fleet transformation. 

Delta will be represented on LATAM’s Board of Directors, further strengthening the relationship. 

The tender offer and the strategic alliance are subject to customary closing conditions and all required governmental and regulatory approvals, including anti-trust immunity. 

Delta expects that the transaction will be accretive to EPS over the next two years. In addition, the transaction will not impact the company’s existing financial commitments to shareholders, including free cash flow and shareholder returns. Delta also expects to remain within targeted leverage ratios.

LATAM expects the transaction will improve free cash flow generation, reduce forecasted debt by over $2 billion by 2025 and improve LATAM’s capital structure, enhancing its ability to execute its long-term strategy.

About Delta

Delta Air Lines (NYSE: DAL) is the U.S. global airline leader in products, services, innovation, reliability and customer experience. Powered by its 80,000 people around the world, Delta continues to invest billions in its people, delivering a world-class travel experience and generating industry-leading shareholder returns. With its constant drive to invest, innovate and expand, Delta today is the world’s No. 1 airline by total revenues.

Delta serves nearly 200 million people every year, taking customers across its industry-leading global network to more than 300 destinations in over 50 countries. Headquartered in Atlanta, Delta offers more than 5,000 daily departures and as many as 15,000 affiliated departures including the premier SkyTeam alliance, of which Delta is a founding member. Through its innovative alliances with Aeroméxico, Air France-KLM, Alitalia, China Eastern, Korean Air, Virgin Atlantic, Virgin Australia and WestJet, Delta is bringing more choice and competition to customers worldwide. Delta operates significant hubs and key markets at airports in Amsterdam, Atlanta, Boston, Detroit, London-Heathrow, Los Angeles, Mexico City, Minneapolis/St. Paul, New York-JFK and LaGuardia, Paris- Charles de Gaulle, Salt Lake City, São Paulo, Seattle, Seoul-Incheon and Tokyo. 

Delta has been recognized as a Fortune’s top 50 Most Admired Companies in addition to being named the most admired airline for the eighth time in nine years. Additionally, Delta has ranked No.1 in the Business Travel News Annual Airline survey for an unprecedented eight consecutive years and named one of Fast Company’s Most Innovative Companies Worldwide for two consecutive years. As an employer, Delta has been regularly awarded top honors from organizations like Glassdoor and recognized as a top workplace for women and members of the military. Delta CEO Ed Bastian was named among the “World’s Greatest Leaders” by Fortune magazine in 2018. 

About LATAM Airlines Group S.A

LATAM Airlines Group is Latin America’s leading airline group with one of the largest route networks in the world, offering services to 143 destinations in 25 countries, including six domestic markets in Latin America – Argentina, Brazil, Chile, Colombia, Ecuador and Peru – in addition to international operations in Latin America, Europe, the United States, the Caribbean, Oceania, Africa and Asia.

The airline group employs over 41,000 people worldwide, operating approximately 1,300 flights per day and transporting 71 million passengers per year. LATAM Airlines Group has 322 aircraft in its fleet, which features the latest and most modern models including the Boeing 787, Airbus A350, A321 and A320neo.

LATAM Airlines Group is the only airline group in the Americas and one of three worldwide to be part of the Dow Jones Sustainability ‘World’ Index. In 2019, it was recognized by the index for sustainable practices, based on economic, social and environmental criteria, for the sixth consecutive year.
LATAM Airlines Group shares are traded on the Santiago Stock Exchange and the New York Stock Exchange in the form of ADRs.”

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