Delta expands in Mexico

The US airline's stake in Aeromexico creates a leading airline alliance in the Mexico-US market.

By Zacks.com Jun 6, 2012 1:49PM

Image: Airline (© Christie & Cole/Corbis)By Zacks Equity Research
    

Delta (DAL), the second largest U.S. airline, has acquired a 4.17% stake in the largest Mexican airline, Grupo Aeromexico, for $65 million.


Under the terms of the deal, Delta received 30.18 million shares of Aeromexico at $31 Mexican pesos per share and became a member of its board. The deal was first announced last year and was just cleared by regulators.


The transaction will expand the networks of both companies between U.S. and Mexico amidst an uncertain economy, threats of a recession looming large over Europe and high fuel prices. Thus, the purchase would create a leading airline alliance in the Mexico-U.S. market.


Together, the companies will offer 93 destinations with 733 daily flights in eight countries through code sharing. In addition, Aeromexico's fleet, which includes Boeing (BA) 777s, 767s and 737s, and Embraer (ERJ) 145s and 190s, will further benefit Delta's network as the company is replacing smaller-gauge inefficient aircraft with more fuel-efficient jets.


Further, Delta and Aeromexico intend to open a new maintenance and overhaul facility in Mexico in the third quarter of 2013.


The deal affirms Delta Air Lines' continued effort to expand domestic and international flights. Within the country, the company is continuing its effort to strengthen its position in New York City through deeper focus on corporate customers, better airport facilities, and increased services into and out of the region. Additionally, the company has a strong foothold in Latin America, in particular Brazil and Mexico.


We believe the company's global network, hub structure and alliances with other airlines will enable it to offer an improved global reach compared with its peers such as United Continental Holdings Inc. (UAL), JetBlue Airways Corporation (JBLU) and Southwest Airlines Co. (LUV).


We are currently maintaining our long-term "neutral" recommendation on Delta Air Lines. For the short term (one to three months), the stock retains a Zacks No. 2 "buy" rank.


More from Zacks

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

118
118 rated 1
270
270 rated 2
472
472 rated 3
714
714 rated 4
624
624 rated 5
608
608 rated 6
623
623 rated 7
445
445 rated 8
319
319 rated 9
125
125 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
BIDUBAIDU Inc10
BMYBRISTOL-MYERS SQUIBB CO.10
CELGCELGENE CORP10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.