Delta Air Lines balances long term foreign investments (and JVs) with short term shareholder rewards
One of the largest agenda items for Delta Air Lines in 2016 is gaining approval for a joint venture with Aeromexico and moving forward to enlarge its stake in Mexico’s largest airline to force change that should drive financial benefits for both airlines. Delta plans to use its three year old investment in Virgin Atlantic as a blueprint for guiding Aeromexico to increased efficiency and margins.
Delta is also taking a stake in China Eastern, and once that agreement is formalised Delta says it will have a foothold in all the top international regions from the US. Many of Delta’s moves to invest in foreign airlines during the last few years reflect its strategy of building network utility for the long haul, creating a scenario where it has to balance those investments with creating an appropriate level of return for shareholders.
In the short term, Delta continues to stress measured capacity growth of flat to 2% in 2016, with the bulk of the increase allocated to the domestic market. Most of the domestic capacity is targeted to New York, Seattle, Los Angeles and Seattle, regions that Delta believes warrant the added supply.
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