Delta to Acquire Stake in China Eastern

MIAMI — Delta Air Lines keeps its interest in forging alliances with foreign carriers. After its offer to sponsor Japanese budget carrier Skymark, the airline has announced today an agreement with China Eastern Airlines to boost its flight options between the US and China.

The agreement, that includes a $450 million investment by the Atlanta-based carrier to acquire a 3.55 percent stake in China Eastern, also entitles Delta to an observer seat on the China Eastern board of directors. Nevertheless, the agreement is conditioned upon the achievement of a final marketing agreement and the corresponding approval by the board of directors of each one of the carriers.

"For the past three years, Delta has welcomed members of the China Eastern team at our headquarters for sharing best practices and work study opportunities. We have learned much from one another already and look forward to deepening our already effective partnership" said Richard Anderson, Delta CEO.

Currently, China Eastern (with its subsidiary Shanghai Airlines) and Delta operate codeshare flights on 30 domestic routes in the U.S., 43 domestic routes in China and seven trans-Pacific routes between China and the U.S. Delta, a founding member of the SkyTeam alliance, also has ties with other two Chinese members: China Southern and Xiamen Airlines, giving the American carrier a privileged position in the Chinese market."The cooperation of the parties is based on a global vision and joint strategic blueprint. The parties will take advantage of their respective route networks, flight services, relevant businesses and advantageous resources to fully connect the world's two top economies as well as two top air transportation markets. The parties wish, through excellent operation and international cooperation, to optimize customer experience, enhance the parties' global competitiveness and promotes the development and revenue growth of both parties" said Shaoyong Liu, China Eastern CEO.

According to a report by aviation intelligence specialist OAG issued last April, world airline industry is entering a period of rapid change and Chinese carriers may be "the ones to replace US airlines as the international air travel market leaders." Today's announcement consolidates Delta Air Lines long-term business partnership in one of the largest aviation markets by the time being, and which is expected to grow as the largest one by 2033.

The world airline industry is entering a period of rapid change and China's carriers may well be the ones to replace US airlines as the international air travel market leaders, according to a new report by aviation intelligence specialist OAG.

US airlines can no longer rely solely on the alliance model to sustain their international growth as other carriers are turning to new forms of cross-border cooperation advises the report, which is titled ‘The Fight for Global Markets – Is Three the Magic Number?’. It further predicts that the industry will undergo large-scale consolidation, and considers how the ‘Rule of Three’ – the tendency for industries to become dominated by three large players – could play out in a future, consolidated global aviation market.

- See more at: http://www.oag.com/Press-Room/chinese-carriers-may-come-out-top-race-global-air-travel-market-share#sthash.DCnGqRZb.dpuf