A few days ago, I wrote a short piece on how Delta strives to deliver an exceptional customer experience. This follow-up entry focuses on the airline’s worldwide partnerships to stay competitive internationally.
One airline alone can’t possibly handle all the routes by themselves, especially international routes and when they don’t want to blow up their financials with unsustainable expenses. Strategic partnerships allow carriers to make possible routes that are far away and not on the carriers’ map. Through joint ventures and investments, Delta has established a great network of partners that enable the carrier to service international routes. Some of the notable partnerships or investments include the stakes in Virgin Airlines, KLM, GOL and AeroMexico in Latin America, China Eastern Airlines and Korean Air in Asia.
The partnership with Korean Air is highly important to Delta Airlines’ desire to expand in Asia. Delta’s revenue between 2012 and 2017 fell significantly. The carrier’s main hub has been Narita, Japan for the past 30 years, but the Japanese government decided to upgrade Haneda, an airport closer to Tokyo, to an international hub. The move drew passengers away from Narita, especially those who ended their trips in Japan; which made Narita less financially sound. Delta’s rivals, American and United, had partners to help them service routes to both Haneda and Narita. Delta didn’t have that option.
As a consequence, Delta started to address the weakness amidst the rise in demand for flights between the US and Asia. In addition to getting approval to fly non-stop to American cities from Haneda, Delta added more flights between China or Korea and America. The carrier first signed a joint venture deal with Korean Air and then bought a 4.3% stake in the parent company of its Asian partner. The collaboration with Korean Air gives Delta access to Incheon, one of the new major airport hubs in the world and Asia, as well as access to more Asian cities. Furthermore, Delta stopped its own services to Hong Kong and Singapore while adding routes to destinations such as Manila. To service Delta passengers to Singapore, it relied on Korean Air.
Elsewhere, Delta announced in October 2019 its acquisition of 20% stake in LATAM. The investment hands the carrier access to the lucrative flights between the US and South America while stripping its rival American of a strategic partner in the region.
In 2018, international passenger revenue made up 29% of the airline’s total passenger revenue.
Disclosure: I own Delta’s stocks in my personal portfolio
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