Grupo Aeromexico is in negotiations to expand its South American alliance with fellow Delta partner, LATAM Airlines Group. The Mexican carrier is working on a possible codeshare agreement with the Chilean-Brazilian airline. What do we know about this? Let’s investigate further.
Aeromexico-LATAM would be a force to reckon in Latin America
In a presentation from Grupo Aeromexico, the Mexican airline says that a leverage partnership with LATAM would “amplify growth domestically & internationally.”
LATAM Airlines Group is the leading South American airline. Aeromexico is the third, after Avianca. Currently, both companies are under Chapter 11 reorganizations due to the COVID-19 crisis. Both carriers expect to shrink and reduce their international and domestic capacities, so a codeshare agreement doesn’t seem farfetched.
For instance, LATAM Brazil recently signed a non-overlapping codeshare agreement with once rival Azul Linhas Aereas. In an interview with Simple Flying, an executive member of Azul said that this agreement was made out of necessity. An Aeromexico-LATAM alliance would be something like this, too.
Currently, Aeromexico is expecting to have up to 80 aircraft by the end of the year, reducing its fleet by 30%. Meanwhile, LATAM has reduced 30% of its workforce and could reduce its fleet by 32 planes, at least.
Both are legacy airlines that have struggled with the appearance of low-cost domestic airlines in the region. It is expected that LATAM and Aeromexico will have to refocus its national strategies and depend on its international connectivity.
According to the Mexican airline, there’s a potential revenue between US$30 and 40 million. The objectives are to co-locate Aeromexico’s and LATAM hubs and optimize the networks for cross connectivity.
Delta has a stake in both airlines
Delta Air Lines has a stake both in Aeromexico and LATAM. In the Mexican carrier, Delta has a 49% participation, although it holds a non-controlling 51% equity stake.
Meanwhile, at the beginning of the year, Delta bought a 20% stake in LATAM. With both carriers, the US airline has a joint venture agreement.
On July, Ed Bastian, Delta’s CEO, said about its partners,
“We have the utmost confidence in 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.”
We contacted Delta for comment; the airline deferred it to Aeromexico. The Mexican airline declined to comment.
That’s not all; Air France-KLM is also in the mix
Aeromexico’s plans don’t stop there. The airline is also planning to expand its transatlantic alliance with Air France-KLM.
According to the presentation, Aeromexico plans to create a “leading Mexico-Europe alliance,” which could have revenues of up to US$50 million.
Before the pandemic, both Air France and KLM flew daily to Mexico City and Cancun. Actually, Mexico City was one of the cities where the French carrier operated with its now gone A380 fleet.
So, what would Aeromexico win with these alliances? According to the airline,
“Expected share gain of 2.5pp in international markets as a result of codeshare alliances that are currently being implemented that will extend the beyond connectivity for widebody markets to Asia, Europe, and South America.”
We contacted Air France-KLM and LATAM for comments. Neither Group has responded so far. The two agreements of Aeromexico are still plans, meaning that, currently, they are not a certainty.
What do you think of Aeromexico’s plans? Let us know in the comments.