MIAMI – Delta Air Lines (DL) must pay LATAM (LA) US$62m for the cancelation of a deal to buy four of the Airbus A350 aircraft already delivered to the latter, according to a court filing by LA.
The first partnership between two companies, signed in 2019, included DL taking over ten of LA’s A350 aircraft registered in the Airbus March Orderbook.
As part of the new agreement established on May 25, the Atlanta-based carrier said it would not cancel the joint-venture, agreeing not to exercise termination, and that it had already received the delivery of four A350, according to a report by Forbes.
The joint operation worth in US$3b was announced in April, right after LA canceled ten Airbus orders in March with further units supposed to be delivered, too. Since then, the deal was set for DL to receive those jets.
At the start of May, the airlines signed a trans-American Joint Venture Agreement to offer complimentary routes in North and South American networks; a strategical alliance for long-term sustainability spearheaded by DL CEO, Ed Bastian, and LA CEO, Roberto Alvo.
As Forbes senior contributor Will Horton points out, the airlines’ revised agreement is dated May 25. LATAM filed for Chapter 11 in the early morning of May 26.
Ongoing airport rebuilding plans
Besides the several cut operations due to the pandemic, the Atlanta-based carrier seeks to accelerate its projects on LaGuardia (LGA), Los Angeles (LAX), and Salt Lake City (SLC) airport terminals to complete them prior to their respective deadlines.
Regarding the current plunge in demand, DL CFO, Paul Jacobson said at the Wolfe Global Transportation Conference that there was an opportunity to speed up the building on LGA and to “lower the overall project cost but also deliver it much, much sooner.”
This project was first worth US$3.9b and set to be ready in 2026, but now it will cost US$3.5b and be ready in less time as the scenario is different: Redeveloping in an active airport would require phased works to maintain several operations going and not interfere with regular passenger flow.
With LAX and SLC also now set to be ready two years ahead of schedule, DL will save millions of dollars it needs to keep itself afloat during the crisis and time to be ready for the passenger demand rebound along with these airports.