Feb 28, 2017 02:39 PM EST
Delta Airline announced its plans to buy 32% of Aeromexico, which is the country's oldest and biggest airline. The upcoming purchase called on Feb.13 will bring Delta's total stake to 49% of Aeromexico's shares.
Following the announcement, Aeromexico's stock soars up to 16% while Delta's stock appeared at 2% in the afternoon of that day. The deal is still under regulatory approval in Mexico and the United States. Last December, Delta and Aeromexico launched its historic partnership to provide customers with substantial benefits in both nations as well as increase the services and jobs for both airlines.
Delta mentioned that it's not only investing in an airline but in a country's economy. "This new investment demonstrates Delta's confidence in Mexico's future and deepens our relationship with Aeromexico," Delta President Ed Bastian said in a statement. But with Trump's policy plans in effect, it cannot be denied that Mexico's future seems bleak.
The president considered a 20% tax on Mexican imports, a tax on Mexican remittances and further wants Mexico to pay for the border wall. Also, Mexico's peso hits an all-time low amid Trump's threats. On top of that, the government raised gas prices that caused a domino effect of higher prices for food and public transportation.
Although Delta and Aeromexico could face a tougher ride ahead, the partnership would still make sense in the long run. Mexico is the second largest country in Latin America with a countless number of tourists spots. In effect, this could help boost the weak peso by encouraging more U.S. travelers to head south and take advantage of a good exchange rate.
The partnership will also help Delta keep up with its U.S. airline competitors. For the past years, JetBlue, Spirit Airlines and Southwest have increased its number of flights and destinations in Latin America. Delta, on the other hand, has a remarked 1,300 weekly flights to Latin America and the Caribbean, flying 49 destinations.
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