Delta Air Lines shocked the aviation world with its decision to buy a 20 percent stake in Latam Airlines Group for $1.9 billion at the end of September, and the repercussions of the deal are likely to rumble on for some time.
While the move will strengthen Delta’s position in South America, it has thrown a spanner in the works of the Oneworld alliance, in which Latam is — at least until it leaves — a key member alongside IAG’s British Airways and Iberia, as well as American Airlines.
IAG CEO Willie Walsh told analysts on an earnings call on Thursday that it was a “very good strategic move” for Delta, before conceding that it meant a change in the way his airlines interact with Latam.
“We continue to have a good relationship with Latam, but this clearly does potentially change the nature of that relationship,” he said.
Even before the news of Delta’s deal broke, IAG and American had suffered a blow with their plans for the region, when a court in Chile banned their joint venture proposals.
Even with these setbacks, Walsh said the market remained an “important segment for us” and highlighted the strength of Iberia’s direct flights to the region.
Delta wasn’t the only rival airline to which Walsh was handing out compliments. Norwegian, which was once a takeover target of IAG’s, has managed in recent months to put itself on a stronger financial footing. Walsh, however, didn’t get much of the fuss about the interline agreement with JetBlue, which he dubbed “very limited”.
“We continue to wish Norwegian well. They’ve done what they needed to do — which is what we said — they would have to start significantly reducing growth and, in many cases, cutting capacity if they were to improve the financial performance,” Walsh said.
“They’re clearly not out of the woods yet and I think they still have a long way to go, but their initial measures are what what you would have expected, and I hope they continue to turn the business around.”
Walsh’s comments didn’t seem to hint about any plans to take another look at buying Norwegian.
Something that IAG is looking at are the slots left by Thomas Cook’s UK airline following the parent company’s collapse into liquidation last month.
“We’ve expressed an interest in a very limited number of slots at [London] Gatwick,” Walsh said.
“The general slot portfolio that Thomas Cook held wasn’t particularly attractive, and with the exception of some limited slots, we’ve no interest in any of the residual assets or activities of the Thomas Cook Group.”
IAG reported a 10 percent drop in pre-tax profit during the third quarter to $1.4 billion (€1.3 billion). The group put the fall down to the pilot strike at British Airways, which it said resulted in an “adverse operating profit impact” of $173 million (€155 million).
Revenue during the three months to the end of September, rose 2.4 percent to $8.1 billion (€7.3 billion).
IAG expects its 2019 operating earnings to be around $239 million (€215 million) or 6 percent lower than the previous year.
The company will give further details on its plans at a capital markets day on November 8.