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Delta Invests $65M In AeroMexico  
User currently offlineFyano773 From Mexico, joined Mar 2004, 789 posts, RR: 1
Posted (2 years 6 months 3 weeks 3 days 1 hour ago) and read 7327 times:

This investment creates the leading airline alliance between Mexico and the United States:

http://www.marketwatch.com/story/del...sts-in-grupo-aeromexico-2012-06-04

Delta Air Lines buys four percent stake in Grupo Aeromexico

MEXICO CITY, June 4, 2012 /PRNewswire via COMTEX/ -- Grupo Aeromexico (mexico:AEROMEX.MX) today received from Delta Air Lines Inc. /quotes/zigman/463579/quotes/nls/dal DAL -11.43% US $65,000,000 as part of this carrier's investment in Mexico's flagship carrier's capital stock, thus strengthening its financial position, confirming its expansion project and creating the leading airline alliance



Consolidation of this alliance also includes the companies' joint investment in their MRO business at new facilities the carriers plan to open in Mexico in 2013. AM & DL will invest equal amounts to expand their aircraft repair business, which will also create new jobs.

Both carriers, which are leaders in their respective markets, reaffirmed their commitment to keep offering customers their best quality service.

Mod Edit: Moved the link from the quoted section as clicking the link lead to an error page.

[Edited 2012-06-04 13:01:19 by srbmod]

19 replies: All unread, jump to last
 
User currently offlineDeltaMD90 From United States of America, joined Apr 2008, 7980 posts, RR: 51
Reply 1, posted (2 years 6 months 3 weeks 3 days 1 hour ago) and read 7112 times:

Makes sense, DL has gone far with their trans-Atlantic partnerships and is working on their trans-Pacific, AM is the logical choice down south.

Does anyone think DL will codeshare with AM more or even start a JV?



Ironically I have never flown a Delta MD-90 :)
User currently offlineEddieDude From Mexico, joined Nov 2003, 7633 posts, RR: 42
Reply 2, posted (2 years 6 months 3 weeks 3 days ago) and read 6899 times:

Quoting DeltaMD90 (Reply 1):
Does anyone think DL will codeshare with AM more or even start a JV?

Codeshare more, definitely. It is part of this transaction. The article states that:

This financial transaction is part of the global contract the carriers signed last year to create a unique alliance in Latin America. This is a long-term agreement that will benefit passengers through the expansion of our codeshare flights.

The carriers collectively offer 93 codeshare destinations that represent 733 daily flights in eight countries. They have also been working on improving and increasing flight schedules to respond to customers' needs in destinations such as New York, Los Angeles, Houston, Chicago and Miami, new daily service to Washington, DC from Mexico City and new flights to Atlanta coming soon. Customers at both airlines enjoy streamlined purchasing processes that allow them to book their travel through to their final destinations.


JV, nope. Mexico and the U.S. do not have an open skies agreement and it is my understanding that the only chance airlines have to receive regulatory authority to pursue an international JV is when the corresponding transborder market is open.



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlineodysseus9001 From United States of America, joined Oct 2008, 139 posts, RR: 0
Reply 3, posted (2 years 6 months 3 weeks 2 days 18 hours ago) and read 6255 times:

Out of curiosity-

1) How will things change for existing Delta TechOps sites if a new site is opened in Mexico?

2) Will the IAD-Mexico City flight and flights beyond Mexico City to points in South America be included in the code share?

Thanks.

J


User currently onlineDalmd88 From United States of America, joined Jul 2000, 2614 posts, RR: 14
Reply 4, posted (2 years 6 months 3 weeks 2 days 11 hours ago) and read 5895 times:

Quoting odysseus9001 (Reply 3):
1) How will things change for existing Delta TechOps sites if a new site is opened in Mexico?

We are told not at all. The plan is to move all the outsourced 757 HMV checks to Mexico. This of course could change.


User currently offlineRWA380 From United States of America, joined Feb 2005, 3461 posts, RR: 5
Reply 5, posted (2 years 6 months 3 weeks 2 days 11 hours ago) and read 5876 times:

Where is DL getting all the cash to invest into other carriers and oil refineries. I know they are profitable currently and have money in the bank, but with volatile fuel prices and uncertain fleet acquisition time frames for some ordered planes, how can DL be so certain they shouldn't hang onto some of this capital until things smooth out a bit? I'm really curious, I am fascinated how DL has become the largest carrier in the world and the actions they take to try and stay ahead of the rest. It is not easy getting to the top of the pile, and even harder to stay there.


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User currently offlineyellowtail From United States of America, joined Jun 2005, 6357 posts, RR: 2
Reply 6, posted (2 years 6 months 3 weeks 2 days 8 hours ago) and read 5636 times:

is this a CM/CO style relationship development, where DL will provide expertise, make the carrier a juggernaut, then cash out, keeping the relationship?


When in doubt, hold on to your altitude. No-one has ever collided with the sky.
User currently offlineEddieDude From Mexico, joined Nov 2003, 7633 posts, RR: 42
Reply 7, posted (2 years 6 months 3 weeks 2 days 8 hours ago) and read 5589 times:

Quoting RWA380 (Reply 5):
Where is DL getting all the cash to invest into other carriers and oil refineries.

Well, 65 million is not exactly a lot of money, so this should not be seen as a major, game-changing investment. I think a carrier as large as DL can easily fund this investment through cash flow without jeopardizing its liquidity. That said, if things were to go awfully wrong for DL from a liquidity point of view, they can always sell the AM shares easily, as they are publicly-traded (although they might fetch a lower price).

Quoting yellowtail (Reply 6):
is this a CM/CO style relationship development, where DL will provide expertise, make the carrier a juggernaut, then cash out, keeping the relationship?

Interesting point. The relationship will certainly seek to improve customer relations at AM, to bring them in line with DL's standards. The goal is for passengers of both carriers to expect the same in terms of elite perks, mileage, lounges, etc. no matter which carrier they are flying. The MRO component of the deal is also very important in my opinion. With respect to cashing out and keeping the relationship, I think you can expect the relationship to continue unless one of the two leaves SkyTeam behind (which I don't see happening); DL might in the future cash out if AM's share price climbs significantly (that might take a long time or just not happen at all), but I really view this acquisition by DL as a long term strategic investment. I am sure DL is very interested in having the right to nominate a director to the AM board.



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlinemcg From United States of America, joined Sep 2003, 828 posts, RR: 0
Reply 8, posted (2 years 6 months 3 weeks 2 days 1 hour ago) and read 3075 times:

Quoting EddieDude (Reply 7):
Well, 65 million is not exactly a lot of money,

I'd respectfully suggest that $65 million is a lot of money.


User currently onlineDalmd88 From United States of America, joined Jul 2000, 2614 posts, RR: 14
Reply 9, posted (2 years 6 months 3 weeks 2 days 1 hour ago) and read 2956 times:

Quoting mcg (Reply 8):
I'd respectfully suggest that $65 million is a lot of money.

To you and me it is, but to a company the size of DL it isn't. I think DL payed out more than that last year in the employee 'Shared Reward Program'. That is a monthly bonus program for coming in at the top of the DOT rankings. Usually $75-$100 per month to each line employee.


User currently offlinemcg From United States of America, joined Sep 2003, 828 posts, RR: 0
Reply 10, posted (2 years 6 months 3 weeks 1 day 22 hours ago) and read 2779 times:

Quoting Dalmd88 (Reply 9):
Quoting mcg (Reply 8):
I'd respectfully suggest that $65 million is a lot of money.

To you and me it is, but to a company the size of DL it isn't. I think DL payed out more than that last year in the employee 'Shared Reward Program'. That is a monthly bonus program for coming in at the top of the DOT rankings. Usually $75-$100 per month to each line employee.

For the three years of 2009, 2010 and 2011DL earned about $210 million. So $65 million is almost 1 year of earnings. I'd say it's a lot of money.


User currently offlineklkla From United States of America, joined Jul 2004, 946 posts, RR: 0
Reply 11, posted (2 years 6 months 3 weeks 1 day 22 hours ago) and read 2750 times:

Quoting mcg (Reply 10):
For the three years of 2009, 2010 and 2011DL earned about $210 million. So $65 million is almost 1 year of earnings. I'd say it's a lot of money.

That's sort of misleading.

Delta earner $854,000,000 last year and $593,000,000 the year before. They had a $1..2 billion loss the year before which was due to economic problems and merger costs that are not relevant now.


User currently offlineEddieDude From Mexico, joined Nov 2003, 7633 posts, RR: 42
Reply 12, posted (2 years 6 months 3 weeks 1 day 22 hours ago) and read 2750 times:

Quoting mcg (Reply 10):
or the three years of 2009, 2010 and 2011DL earned about $210 million. So $65 million is almost 1 year of earnings. I'd say it's a lot of money.

Well, DL had net income of 124 million dollars during the first quarter of 2012, and had cash and cash equivalents of 2.65 billion dollars as of December 31st, 2011, so I'd say 65 million is a small amount of money for a company their size.



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlinejustloveplanes From United States of America, joined Jul 2004, 1065 posts, RR: 1
Reply 13, posted (2 years 6 months 3 weeks 1 day 22 hours ago) and read 2693 times:

Taking advantage of UA's missteps down IAH way...

User currently offlinemcg From United States of America, joined Sep 2003, 828 posts, RR: 0
Reply 14, posted (2 years 6 months 3 weeks 1 day 21 hours ago) and read 2610 times:

Quoting klkla (Reply 11):
They had a $1..2 billion loss the year before which was due to economic problems and merger costs that are not relevant now.

$1.2 billion is a large loss. I don't think you can simply assume it away.


User currently offlineCompensateMe From United States of America, joined Jan 2009, 1301 posts, RR: 0
Reply 15, posted (2 years 6 months 3 weeks 1 day 19 hours ago) and read 2457 times:

Quoting mcg (Reply 8):
I'd respectfully suggest that $65 million is a lot of money.

Perhaps DL expects to earn a profit (and perhaps lower costs elsewhere) with its investment?



Gordo:like this streaming video,Sky magazine,meals for sale at mealtime-make customer satisfaction rank so high at UA
User currently offlineghifty From United States of America, joined Jul 2010, 891 posts, RR: 0
Reply 16, posted (2 years 6 months 3 weeks 1 day 18 hours ago) and read 2394 times:

Quoting mcg (Reply 8):
I'd respectfully suggest that $65 million is a lot of money.

Not really, Delta has nearly $43b in assets.. i.e., money they can actually spend. From a normal person's point-of-view, or when considering their net profits, $65m is a lot.. but that's not how the business world works/thinks/functions.

Edit: Well, actually it would appear Delta has an equity of about $900m.. so I suppose you could say the investment is alrge.

[Edited 2012-06-05 20:07:54]


Fly Delta Jets
User currently offlineRWA380 From United States of America, joined Feb 2005, 3461 posts, RR: 5
Reply 17, posted (2 years 6 months 3 weeks 1 day 8 hours ago) and read 2158 times:

Quoting EddieDude (Reply 7):
Well, 65 million is not exactly a lot of money, so this should not be seen as a major, game-changing investment. I think a carrier as large as DL can easily fund this investment through cash flow without jeopardizing its liquidity. That said, if things were to go awfully wrong for DL from a liquidity point of view, they can always sell the AM shares easily, as they are publicly-traded (although they might fetch a lower price).
Quoting mcg (Reply 8):

I'd respectfully suggest that $65 million is a lot of money

I remember when American Express bought SkyMiles for pennies on the dollar to start it's SkyMiles Amexcard program, they paid about double this amount, and got a bazillion SkyMiles to give to members as awards. A great investment for Amex and DL at that time needed the cash. Some Amex employees had SkyMile cards for company business charges, and got their departments free flight awards to help balance their P & L for their division.



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User currently offlineklkla From United States of America, joined Jul 2004, 946 posts, RR: 0
Reply 18, posted (2 years 6 months 3 weeks 1 day 1 hour ago) and read 1935 times:

Quoting mcg (Reply 14):
$1.2 billion is a large loss. I don't think you can simply assume it away.

My point is that a loss three years ago is not relevant to the point of this thread. The question was whether Delta could afford to invest $65 million in AM. Delta has earned over $1.4 billion in the last two years. That is a much more accurate way to describe their current financial situation as opposed to their past financial condition.


User currently offlinemcg From United States of America, joined Sep 2003, 828 posts, RR: 0
Reply 19, posted (2 years 6 months 3 weeks 23 hours ago) and read 1855 times:

Quoting klkla (Reply 18):
Quoting mcg (Reply 14):
$1.2 billion is a large loss. I don't think you can simply assume it away.

My point is that a loss three years ago is not relevant to the point of this thread. The question was whether Delta could afford to invest $65 million in AM. Delta has earned over $1.4 billion in the last two years. That is a much more accurate way to describe their current financial situation as opposed to their past financial condition.

I didn't question whether DL can afford to invest $65 million in AM. They clearly have the $65 million to spend. My point is that $65 million is a lot of money, because it is. Comparing it to historical annual profitability is simply intended to provide some perspective and emphasize that in fact $65 million is a lot of money.


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