Delta to acquire stake in China Eastern Airlines

Delta Air Lines has agreed to take a 3.55% stake in Shanghai-based China Eastern Airlines.

The deal, which is worth US$450 million, forms part of a broader partnership between the two SkyTeam alliance members, which also includes codeshare agreements.

The purchase of equity marks the first direct investment in a Chinese airline by a US-based carrier.

“Delta’s relationship with China Eastern is long-standing. We share a vision that will create the most profitable, enduring franchise between the US and China, with world-class customer service,” said Richard Anderson, Delta’s CEO.

“For the past three years, Delta has welcomed members of the China Eastern team at our headquarters for sharing best practices and work study opportunities. We have learned much from one another already and look forward to deepening our already effective partnership.”

China Eastern, its subsidiary Shanghai Airlines, and Delta currently operate codeshare flights on 30 domestic routes in the US, 43 domestic routes in China and seven trans-Pacific routes between the two countries.

Under the new investment, Delta will purchase approximately 10% of China Eastern’s H-shares, which trade on the Hong Kong Stock Exchange. The equals 3.55% of the airline’s total shares. As a result, Delta will be entitled to an “observer seat” on the China Eastern board of directors.

“Delta’s equity investment in China Eastern is an investment in the future success of the partnership,” Anderson said. “China is the second largest travel market from the US and is projected to grow more than twice the global average, becoming the largest market from the US in the next few years.”

China Eastern currently operates 35 weekly flights from Shanghai to Los Angeles, New York, San Francisco and Honolulu, plus three flights a week from Nanjing to Los Angeles.

Delta meanwhile, has increased its China network by nearly three times in the past five years. This summer it will operate 28 weekly services to Shanghai this summer, plus a daily service to Beijing, from Seattle and Detroit, and to Hong Kong from Seattle.