LATAM Airlines has confirmed it will exit the Oneworld alliance on 1 October 2020. Instead of Oneworld membership, LATAM will create a new strategic partnership with Delta Air Lines in the USA. This will leave the Oneworld alliance with no member airlines based in South America.
After exiting Oneworld in October 2020, LATAM Airlines intends to remain unaligned to any of the three global airline alliances – Oneworld, Star Alliance and SkyTeam. But LATAM, which is the largest airline in South America, will keep most of its existing bilateral partnerships including its codeshare agreement with Qantas.
While the new partnership will be great news for Delta customers, and for regular travellers between North and South America, LATAM’s exit from the Oneworld alliance is largely bad news for Australians and leaves Oneworld with a gaping hole in South America that it will struggle to fill.
Delta to purchase 20% stake in LATAM Airlines
Delta Air Lines has announced its intention to purchase a 20% stake in LATAM, worth US$1.9 billion and securing Delta a board position at LATAM Airlines. This is in addition to a US$350 million investment, part of which will cover LATAM’s costs of exiting the Oneworld alliance. Delta will also purchase 14 Airbus A350 aircraft from LATAM Airlines.
Qatar Airways, which has a public, bitter and ongoing rivalry with Delta, owns 10% of LATAM Airlines and also holds a seat on the LATAM board. Apparently, Qatar Airways was not consulted about Delta’s decision.
Delta and LATAM Airlines could begin codesharing on some routes by the end of this year, but will need to wait for full regulatory approval before it can commence a joint venture. This process could take 1-2 years. In the meantime, Delta will end its partnership with Brazil’s GOL Airlines. And LATAM Airlines will end its partnership with Oneworld’s American Airlines.
LATAM had previously pursued a joint venture with American Airlines, but this was rejected by Chilean authorities. Delta and LATAM do not foresee regulatory issues this time around as the airlines’ route networks are complementary with almost no overlap.
What does this mean for Qantas?
LATAM Airlines will continue to offer Oneworld benefits until it officially leaves on 1 October 2020. Until this time, you can continue to earn Qantas Frequent Flyer points and status credits for LATAM Airlines flights.
After October 2020, you’ll still be able to earn and redeem Qantas points for LATAM Airlines flights. However, you’ll no longer be able to earn Qantas status credits unless you’re booked on a Qantas codeshare flight (with a “QF” flight number) operated by LATAM. You will also no longer be able to use LATAM Airlines as part of a Oneworld Classic Flight Reward booking after 1 October 2020.
Qantas and Oneworld frequent flyers will also lose access to Oneworld status benefits, including lounge access and priority check-in, when flying with LATAM Airlines after 1 October 2020.
Qantas will keep its existing codeshare agreement with LATAM Airlines, which covers flights between Sydney, Melbourne, Auckland and Santiago. Qantas also codeshares on LATAM flights beyond Santiago to selected South American destinations including Lima, Sao Paulo, Rio de Janeiro, Bogota, Guayaquil, Antofagasta, Punta Arenas and La Serena. But there are also many large cities in South America which are not covered by Qantas codeshares, such as Buenos Aires. So, this is a bad thing overall for Qantas frequent flyers travelling to South American destinations not covered by Qantas codeshares.
If Qantas is to effectively compete in the Australia-South America market following LATAM’s exit from Oneworld, it will either need to offer many more South American codeshare destinations or enhance its bilateral agreement with LATAM to offer greater benefits to frequent flyers when booked on a “LA” flight number.
A huge loss for Oneworld
LATAM Airlines is currently the only Oneworld member based in South America. The loss of LATAM Airlines leaves a huge gap in the alliance’s network, and it will particularly limit the usefulness of Oneworld products like the Oneworld Explorer round-the-world ticket, and the Qantas Oneworld Award.
Oneworld members including Qantas, American Airlines, Iberia, British Airways and Qatar Airways will still fly to South America. Royal Air Maroc, which will join the Oneworld alliance next year, also flies to South America with a few flights per week from Casablanca to Sao Paulo and Rio de Janeiro. But after LATAM’s exit, the only Oneworld flight available within the continent will be the Qatar Airways fifth-freedom flight from Sao Paulo to Buenos Aires. The loss of access to unique LATAM Airlines routes like Sao Paulo-Johannesburg and Santiago-Easter Island-Papeete will also cause problems for some Oneworld flyers.
Realistically, there is no South American airline that can fully replace LATAM. Avianca, Copa Airlines and Aerolíneas Argentinas are already in an alliance. The only other large airlines in South America are Brazil’s GOL Airlines and Azul. They are both currently unaligned, but offer limited international connectivity outside of Brazil.
Global alliances losing favour?
Delta CEO Ed Bastian recently proclaimed that he thought the SkyTeam alliance, of which Delta is a member, added little value to customers or member airlines. Instead of focusing on SkyTeam, the airline has decided to pursue a strategy of investments and joint ventures with foreign airlines. Delta already owns stakes in Virgin Atlantic, Aeromexico, Korean Air, China Eastern and Air France/KLM.
So far, this strategy seems to have worked much better for Delta than it did for Etihad Airways – which has accrued massive losses on the back of failed investments in airlines like Airberlin, Alitalia and Jet Airways.
Closer to home, Virgin Australia has shunned airline alliances saying they prefer to pick and choose their own partners. This may have some advantages for the airline, but it can result in a sub-par experience for frequent flyers when travelling overseas. There is no doubt that Qantas’ membership in the Oneworld alliance is a compelling reason that many Australians choose to stay loyal to Qantas.
Join the discussion on the Australian Frequent Flyer forum: Delta buys 20% of LATAM, which will exit oneworld