U.S.-based Delta Air Lines (DAL) and Korean Air Lines are buying a combined 25% stake in Canada’s WestJet Airlines for $550 million.
The deal will see Delta invest $330 million for a 15% stake in WestJet and Korean Air invest $220 million for a 10% interest. The stakes in privately held WestJet are being sold by the carrier’s parent company, Toronto-based private equity firm Onex Corp. (TSE:ONEX).
The equity stakes in WestJet come as airlines around the world look to merge and consolidate so that they can expand and dominate high-volume routes and strengthen their market position vis-à-vis rivals. Some analysts say this approach has led to higher fares and reduced competition in the global aviation industry.
Challenging Market
Delta’s new stake in WestJet comes amid a challenging airline market. Delta, and other U.S. carriers, have revised down their guidance and outlooks for the remainder of this year amid economic uncertainty and signs that people are planning to travel less as they tighten their purse strings.
WestJet has had various partnerships with both Delta and Korean Air Lines since 2011. Moving forward, WestJet will continue to be majority owned by Canada’s Onex Corp. The new equity stakes also come at a time when Canadian airlines are seeing a decline in U.S.-bound bookings following U.S. President Donald Trump’s tariffs on Canada’s imports.
DAL stock has declined 20% this year.
Is DAL Stock a Buy?
The stock of Delta Air Lines has a consensus Strong Buy rating among 16 Wall Street analysts. That rating is based on 13 Buy and three Hold recommendations assigned in the last three months. The average DAL price target of $60.56 implies 26.11% upside from current levels.
