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MarketScreener Homepage  >  Equities  >  Nasdaq  >  American Airlines Group Inc.    AAL

AMERICAN AIRLINES GROUP INC.

(AAL)
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Delta, WestJet scrap planned joint venture after U.S. demands

11/20/2020 | 10:59pm EST
FILE PHOTO: A WestJet Boeing 737 airplane lands at Vancouver's international airport in Richmond,

WASHINGTON (Reuters) - Delta Air Lines and Canada's WestJet said late on Friday they had scrapped a proposed U.S.-Canada joint venture after the U.S. government demanded changes the airlines insisted were "unreasonable and unacceptable".

Last month, the U.S. Transportation Department as part of its tentative antitrust immunity approval said it would require the carriers to remove Swoop, an ultra low-cost carrier affiliate of WestJet, from the alliance, and divest 16 takeoff and landing slots at New York's LaGuardia Airport.

The airlines said in a filing that the U.S. demands were "arbitrary and capricious" especially the slot divestitures. They had argued the alliance would "optimize aircraft utilization, enhance schedules, and lower costs."

The airlines said in a joint statement they remain committed to developing a joint venture "but in the meantime will explore deepening the alliance."

The U.S. Transportation Department did not immediately comment on Friday.

The Delta-WestJet joint venture would have had a combined 27% share of scheduled air carrier transborder capacity, while the dominant carrier, Air Canada, has 45%.

WestJet is owned by private equity firm Onex Corp.

Canada, with 38 million people, is the second-largest U.S. international passenger air market after Mexico, with Toronto flights accounting for over 50% of transborder air travel demand.

U.S.-Canada transborder flight capacity has grown 15% over the last five years to 39 million seats annually, but passenger traffic has plummeted sharply in the face of the coronavirus pandemic.

The airlines' application had been pending with U.S. officials for more than two years. The Canadian Competition Bureau conducted its own review and granted an unconditional "no action" letter in June 2019.

U.S. air carriers had urged slot divestitures at LaGuardia, noting American Airlines, Delta and United Air Lines control 83% of all slots, with Delta controlling 45% of flights.

WestJet and Delta said losing slots would deprive them "of critical operating rights at one of the most important strategic hubs in Delta's global network at a time when Delta is

investing billions of dollars of its own capital in a comprehensive facilities improvement project at this airport."

They would be forced, the airlines added, "to sell these strategic corporate assets during a global pandemic that has inflicted an unprecedented crisis on this industry, virtually

ensuring that they would be sold at a fire sale price."

(Reporting by David Shepardson; Editing by Lincoln Feast and Jacqueline Wong)

By David Shepardson


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
AIR CANADA 4.37% 24.86 Delayed Quote.-50.90%
AMERICAN AIRLINES GROUP INC. 0.27% 14.98 Delayed Quote.-47.77%
DELTA AIR LINES, INC. -0.56% 41.06 Delayed Quote.-29.79%
ONEX CORPORATION 0.04% 71.3 Delayed Quote.-13.23%
UNITED CONTINENTAL HOLDINGS, INC. -0.75% 45.3 Delayed Quote.-48.58%
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Financials (USD)
Sales 2020 17 193 M - -
Net income 2020 -9 173 M - -
Net Debt 2020 31 669 M - -
P/E ratio 2020 -0,78x
Yield 2020 0,78%
Capitalization 8 174 M 8 174 M -
EV / Sales 2020 2,32x
EV / Sales 2021 1,52x
Nbr of Employees 110 500
Free-Float 89,5%
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Mean consensus UNDERPERFORM
Number of Analysts 21
Average target price 10,89 $
Last Close Price 14,98 $
Spread / Highest target 60,2%
Spread / Average Target -27,3%
Spread / Lowest Target -93,3%
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Managers
NameTitle
William Douglas Parker Chairman & Chief Executive Officer
Robert D. Isom President
David G. Seymour Senior Vice President-Operations
Derek J. Kerr Chief Financial & Accounting Officer, Executive VP
Maya Leibman Chief Information Officer & Executive VP