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Pandemic sours Delta’s investments in foreign airways, costing $2 billion


Aeromexico airplanes on the Mexico City International Airport.

John Gress | Corbis | Getty Images

Delta Air Lines spent years amassing fairness stakes in foreign airways from the U.Okay. to Chile to develop internationally and achieve sway over these carriers. The coronavirus pandemic has upended these plans and is proving expensive as monetary turmoil hits airways around the globe.

Foreign possession guidelines stop outright purchases of airways overseas however fairness investments and different partnerships have proved fashionable for carriers keen to realize entry to worldwide markets.

But world journey has been significantly difficult in the pandemic as carriers grapple with not solely considerations over the virus however outright journey bans. Delta’s home passenger income, which makes up greater than three-quarters of ticket gross sales, dropped 93% in the second quarter from a yr in the past, however income fell 98% in Latin America and 97% for trans-Atlantic routes.

Delta on Tuesday posted a internet lack of $5.7 billion for the second quarter, its largest quarterly loss in 12 years. The Atlanta-based airline took $2.1 billion in costs tied a few of these investments in foreign airways. It wrote down $1.1 billion on its funding in LATAM Airlines, Latin America’s largest provider, which filed for Chapter 11 bankruptcy safety in May, lower than a yr after Delta introduced it was shopping for a 20% stake, snatching the provider away from its earlier companion, American.

It additionally took a $770 million write-down in its Aeromexico funding after struggling monetary losses and the Mexican airline filed for Chapter 11 chapter safety. And Delta took a $200 million cost on its funding in Virgin Atlantic.

Delta nonetheless has a framework in place for strategic partnerships with these airways, which provides it additional attain into these markets and vice versa.

Delta famous that the governments in these airways’ residence nations did not present monetary help just like the $50 billion in loans and direct federal assist put aside for U.S. airways.

“While each of these is disappointing, none of our partners’ home countries were prepared to provide governmental financial support similar to what the U.S. Treasury did with the CARES Act which necessitated their decisions to restructure,” Delta CEO Ed Bastian mentioned on an earnings name Tuesday. “We have the most — the utmost confidence in all of our partners and remain firmly committed to our partnerships, which will be important when we rebuild a much more resilient international network in the recovery.”



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