Delta doubles down on pre-pandemic international airline investment strategy

At the start of the pandemic, Delta Air Lines found itself in an unenviable position, even by airline industry standards. Over the past decade, the airline had spent time and money investing in foreign carriers, taking ownership stakes in joint venture partners like Aeromexico, Virgin Atlantic, Korean Air and LATAM.

But as international travel ground to a halt and other countries saw even slower bouncebacks in domestic travel demand than the U.S., Delta was left holding a losing hand with disproportionate exposure to long-haul travel woes. As the international airlines worked out aid packages, loans, and bankruptcy filings, Delta was left with only minority control over a significant portion of its assets.

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Still, the strategy has its advantages when international travel is booming. And it seems that Delta expects the good times to roll once more.

The airline said Monday that it would invest additionally in Virgin Atlantic, Aeromexico and LATAM, an effort to "bolster Delta’s global platform that provides customers an enhanced network, seamless connectivity and an elevated experience, as well as fuel business growth for Delta, its employees and its partners."

The airline will make the investments as the three airlines exit restructuring and recapitalization plans following their respective pandemic bailouts and bankruptcies. Delta says it will target a 20% equity stake in Aeromexico and a 10% stake in LATAM, while maintaining a 49% ownership in Virgin Atlantic — the maximum possible under U.K. law.

The overall value of the investments in the three airlines will equal about $1.2 billion, Delta said.

“These strategic investments in our partners will transform our ability to improve travel for our customers, enabling us to deliver a seamless travel experience alongside offering our customers an unrivalled network between North American and premier markets worldwide,” Delta CEO Ed Bastian said in a statement. “The work each of our partners has done to strengthen their businesses for the future makes these partnerships even more valuable and creates a new era of international travel to benefit our customers, our employees and our investors as global travel rebounds in 2022 and beyond.”

Creditors have objected to Delta's part in Aeromexico's restructuring, as reported by FlightGlobal, citing an inherent conflict of interest in Delta's role on the Mexican carrier's board and as investors seeking to convert their financing into equity.

Delta did not reply to TPG's request for comment.

Delta first invested in Aeromexico in 2012, and increased its stake in 2017 when it launched a joint venture with the carrier. Delta took its initial position in Virgin Atlantic in 2013, part of its launch of a joint venture with the U.K.-based airline.

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The airline made an investment for 20% of LATAM in December 2019 — just before the start of the pandemic — after courting the airline away from partner American Airlines.

Delta also holds equity in Air France-KLM, Korean Air and China Eastern, but said there was no change to its investments in those carriers.