Delta’s Bold Bid For Argentina’s State Airline—Strategic Masterstroke or Financial Quagmire? – View from the Wing

Local media in Argentina is reporting that Delta has made an offer to buy Aerolineas Argentinas.

Aerolineas Argentinas joined SkyTeam, the Delta-led alliance, back in 2012. The carrier has 10 Airbus A330s, 46 Boeing 737s, and 24 Embraer E190s. It also has two 737 cargo planes.

• On the one hand, President Javier Milei is willing to have the government sell the state airline to foreign interests.
• On the other hand, with Milei opening domestic routes up to foreign company, owning the Argentine state carrier isn’t worth so much. However this could be a cheap route to access the airline’s fleet of Airbus A330 widebody aircraft.

Aerolineas Argentinas Crew

This Would Match Delta’s Strategy Of Buying Stakes In Airlines Around The World

Delta doesn’t just partner with airlines around the world. For its closest partners, it controls them. They have stakes in Aeromexico; LATAM; Virgin Atlantic; China Eastern; Korean Air; and Air France KLM. They looked at buying ITA Airways (the new Alitalia) as well.

Often these investments are highly strategic. They helped Korean Air management retain control of the carrier. Their Virgin stake is 49%, which is really buying a London Heathrow operation. Buying into LATAM gave them a South America partner while stealing a key component of American’s strategy out from under them.

The U.S. market is mature, and there are only so many growth opportunities here. They can get growth in other parts of the world, as well as access to markets, while cementing close relations.

Aerolineas Argentinas is a basket case but would be better run under Delta. And Delta might gain the opportunity to repurpose some of their widebody aircraft. But it’s also a money-loser unless they can saddle the government with some of its obligations and perhaps even then. Delta does drive very aggressive bargains.

Buenos Aires

Argentina Is Desperate To Offload Aerolineas Argentinas

Argentina has to do something about the loss-making airline which has cumulatively lost $8 billion in taxpayer money since it was renationalized in 2008. And Argentina can’t afford to go deeper.

The country’s annual inflation rate was 211.4% last year. They had negative 5% GDP growth. Just 5% of people lived in poverty in Argentina ten years ago, now 40% do.

This is a country that saw its peak a century ago and has largely been in decline under authoritarian leaders since then. American Airlines stopped accepting cash in the country at the end of last year.

Here’s how it looks to pay for a group dinner (and not a particularly expensive one, at that!)

Paying the bill is a whole event! First the guest counts out the bills into piles of 10,000 pesos, then the waiter recounts to make sure it’s right pic.twitter.com/9g2RFWNj5M

— Devon ☀️ (@devonzuegel) December 28, 2023

They stopped flying to New York. They stopped flying to Havana. They’ve worked to shed as much as two-thirds of their staff. Delta would be a much stronger operator for the assets, though that could include repurposing some of those assets.

Buenos Aires

This Is Far From A Done Deal

Local media reporting doesn’t suggest a deal is imminent, just that bids have been discussed. Delta tried to buy the new Alitalia and that didn’t work out. No doubt any arrangement would be politically complicated. But it’s something that now seems more possible than it did last week.