Delta chief executive officer Ed Bastian views the Korean Air and its Incheon International Airport hub in Seoul as a gateway to adding more destinations across Asia.Curtis Compton/The Associated Press
Delta Air Lines Inc said on Thursday it had acquired a 4.3 per cent stake in joint-venture partner Korean Air Lines Co Ltd’s parent company with a view toward expanding across Asia.
Atlanta-based Delta is growing internationally both through joint ventures - which allow airlines to coordinate fares and schedules while building a presence in new markets - and equity investments, which help airlines align their respective strategies.
The No. 2 U.S. carrier said it intended to increase its stake in Hanjin Kal Corp, which owns about 30 per cent of Korean Air, to 10 per cent over time, after receiving regulatory approval.
It did not disclose how much it paid for the 4.3 per cent stake, worth about $88 million, according to current market prices.
Delta’s stake purchase was intended to ensure its partner’s “stable management rights,” Korean Air said in a statement.
Delta has said it sees Seoul’s Incheon International Airport, the hub of Korean Air, as a gateway for more destinations across Asia.
The two airlines are members of the SkyTeam alliance and formed a joint venture last year that includes 290 U.S. destinations and over 80 in Asia. This year, Delta launched routes to Seoul and Osaka in partnership with Korean Air, Hanjin Kal’s flagship unit.
“Long term, the partnership and the joint venture is strong in terms of size and there’s no reason to think it can’t grow substantially into the future,” Delta Chief Executive Ed Bastian said at an aviation summit earlier this month in Seoul.
Delta also owns stakes in Grupo Aeromexico, Air France KLM, China Eastern, Brazil’s Gol and Virgin Atlantic, and has been negotiating a stake in Alitalia.
KOREAN AIR SUCCESSOR
Delta’s investment follows the sudden death in April of Cho Yang-ho, the patriarch of Hanjin Kal and Korean Air, which raised questions about the future of both.
Since the death of his father, 43-year-old Walter Cho has led Korean Air as CEO and chairman, but the company has yet to inform regulators about a definitive succession plan.
The late tycoon died at age 70, just weeks after shareholders decided to end his 27-year tenure on the airline’s board. Cho’s widow, two daughters and Walter Cho all hold stakes in Hanjin Kal.
At the Seoul conference, Bastian said he had “a lot of confidence” in Walter Cho, noting their friendship had gone back 20 years.
Hanjin Kal’s ownership structure has come under scrutiny since a local activist fund raised its stake to nearly 16 per cent. The Cho family and its academic foundations own 29 per cent, including the late Cho’s 17.8 per cent stake.
If Delta raises its stake to 10 per cent in Hanjin Kal, with diversified businesses including hotels, logistics and budget airlines, it would become the third biggest shareholder.
Korean Air grows its own food for cabin meals and also owns hotels and a limousine service
Shares in Delta closed down 0.7 per cent at $55.97 in New York on Thursday, while Korean Air closed 0.3 per cent lower and Hanjin rose 0.5 per cent in Seoul.