Delta, Trust Offer To Raise Aeromexico Stake

Delta Air Lines said it intends to buy up to an additional 32 percent of Aeromexico, in what could be a nearly USD$600 million cash deal that strengthens its grip on a fast-growing market.

The investment could raise Delta's 4.1 percent stake in Aeromexico to 49 percent if Delta and its pension trust also exercise share purchase options they hold. Delta offered to pay 52 percent above the Mexican airline's closing price of MXP28.74 pesos.

The move reflects an attempt by Delta to raise competition with American Airlines, which has been a larger player in travel to Latin America. It follows a recent application by Delta and Aeromexico for immunity from US antitrust law so they can coordinate schedules and prices for flights, making connections more attractive for customers.

Aeromexico said in a news release that it was informed of Delta's intentions. The deal remains subject to approval by both companies' boards.

"This new investment demonstrates Delta's confidence in Mexico's future," Delta's President Ed Bastian, who sits on Aeromexico's board, said in a news release.

Passenger traffic between the United States and Mexico is expected to grow on average 4.7 percent per year until 2035, according to a forecast this year by the FAA. That is the highest rate of growth for travel between the United States and any country in Latin America.

Delta also owns a 49 percent stake in Virgin Atlantic Airways and just under 10 percent of Brazil's Gol.