Delta Air Lines Inc. has agreed to buy a 3.55 percent stake in Skyteam partner China Eastern for $450 million, continuing its strategy of taking minority interests in partners to intensify cooperation in competitive international markets.
As in deals with Aeromexico and Brazil’s GOL, the agreement will give Delta an observer seat on the Shanghai-based company’s board. Delta’s investment will take the form of China Eastern H shares on the Hong Kong Stock Exchange. The deal is contingent on the companies’ boards of directors signing off on a joint marketing plan, according to a news release.
The two airlines already operate codeshare flights, allowing Delta, which operates nonstop service from the U.S. to the cities of Beijing, Shanghai and Hong Kong, to sell onward tickets into 43 other Chinese destinations served by China Eastern. The Chinese airline could sell into 30 U.S. cities via Delta’s vast domestic network.
Now, they’ll be better able to coordinate schedules and streamline the customer experience, executives said. Delta recently moved into Terminal 1 at Shanghai’s Pudong International Airport to be closer to its Chinese partner, and the new agreement will allow them to invest jointly in upgrades.
China Eastern’s leadership has been visiting the Delta headquarters in Atlanta over the last three years to share knowledge and best practices.
Delta recently became the first U.S. airline to accept ticket payments on Alipay, the online payment platform from e-commerce giant Alibaba. Delta also has plans to beef up its social media presence in China, launching a profile on the WeChat social network.
The Atlanta-based airline once operated a flight between Atlanta and Shanghai during 2008-09, and CEO Richard Anderson recently hinted that it could return in the long run, but to date, the airline hasn’t announced any concrete plans to reconnect the Southeast U.S. with China with a nonstop route.
A Delta spokesperson said it’s too early to comment on the potential impact on routes but noted that the partnership will provide greater choice for travelers between the U.S and China.