Delta Air Lines and its SkyTeam partner Korean Air announced today that they will strengthen their respective partnerships with Canadian airline WestJet by purchasing minority stakes from Onex Partners. These investments are intended to build on the carriers’ existing relationships and provide further benefits for customers in North America, Europe, Asia and beyond.
Delta and Korean Air Buy 25% Stake in WestJet
The agreements, announced today, will see Delta invest $330 million for a 15% stake in the airline while Korean Air will invest $220 million for a 10% stake. In an interesting twist, upon closing the deal, Delta has the right and intent to sell and transfer a 2.3% stake in WestJet to its Joint Venture partner Air France-KLM, also an existing WestJet partner, in exchange for US$50 million.
This is the latest development in a partnership that dates back to 2011 when Delta and WestJet became codeshare partners. Korean Air followed soon after with its own codeshare agreement in 2012. When discussing the investment, Delta CEO Ed Bastian said:
“Investing in a world-class partner like WestJet aligns our interests and ensures that we remain focused on providing a world-class global network and customer experience for travelers in the United States and Canada. Together, Delta and our airline partners are connecting the world and transforming the future of travel.”
Walter Cho, Chairman and CEO of Korean Air and Hanjin Group, added:
“We are pleased to invest in WestJet as part of our continued commitment to enhancing transpacific connectivity. This strategic partnership will enhance our global network and create long-term value for customers through greater choice and convenience.”
Delta is no stranger to equity investments in its airline partners, having purchased stakes in Air France-KLM, LATAM, Aeromexico, Virgin Atlantic, China Eastern and Korean Air’s parent company, Hanjin KAL.
Partnership Comes Amid Declining Transborder Travel Demand
The partnership between Delta, Korean Air, and WestJet comes as demand for transborder travel between the United States and Canada is in a sharp decline. The global trade war and President Trump’s insistence that Canada should become the 51st state are causing many Canadian travelers to avoid visiting the United States.
While an agreement of this size has likely been in the works for quite some time, it will be interesting to see how the airlines, especially WestJet and Delta work together in the short term.
At my home airport in Austin, we’ve already seen the effects of the decrease in demand as WestJet cancelled a planned route between the Texas capital and Vancouver prior to launch, citing changes in travel demand.
This comes despite the fact that Delta is building up a robust Focus City operation at Austin-Bergstrom International Airport which could provide feed to the WestJet route.
Summary
Delta and its SkyTeam partner Korean Air are investing a combined $550 million in Canada’s second largest airline, WestJet. Delta will own 15% of the airline with Korean Air owning 10%. The three carriers have been working together for years but expect a deepened partnership once this goes into effect. WestJet will continue to be majority owned and operated by Onex Partners.