Delta picks Canadian partner as airline consolidation quietly goes global

Key Points
  • Delta and WestJet agree to a joint venture.
  • The deal gives Delta a bigger footprint in Canada.
  • The airlines would share revenue, costs and profits.
WestJet planes at Pearson International Airport in Toronto.
Machado Noa | LightRocket | Getty Images

Delta Air Lines has quietly expanded its global footprint over the past few years, buying minority stakes or forming joint ventures on four continents.

Now, it's turning to Canada. The airline and Canadian carrier WestJet said Wednesday they have reached a deal to form a joint venture. The agreement, if approved by regulators, would allow the airlines to share profits and revenue, a Delta spokeswoman said.

The deal underscores Delta's ambitions to grow globally after years of post-bankruptcy consolidation, which has left Delta and three other large U.S. carriers in control of more than two-thirds of the domestic market.

Consolidation through partnerships is evident on some of the world's most lucrative routes. As of this month, 88 percent of seats flown from the United States or Canada to Europe were operated by an airline that's in a joint venture or other industry alliance.

But Delta's deal would also bolster its international presence as low-cost upstarts go after passengers with sub-$100 fares.

Because of foreign ownership restrictions, outright purchases of airlines abroad are usually out of reach. A partnership with an international airline can give Delta, and other airlines that adopt this strategy, a foothold in fast-growing foreign markets, as record numbers of travelers take to the skies.

Toronto-listed WestJet is Canada's second-largest airline, after Air Canada, which has a code-sharing agreement with United Airlines. If approved, the deal would be Delta's eighth partnership with an international airline. WestJet and Delta previously had a code-sharing agreement.

In July, Delta, Air France-KLM and Virgin Atlantic announced a deal to combine their joint ventures for trans-Atlantic service. Delta has also snapped up minority stakes in Aeromexico and China Eastern Airlines. The U.S. Department of Transportation approved a joint venture between Delta and Korean Air, Delta said last month.

Other airlines have also opted for that strategy. American Airlines earlier this year announced it would buy a minority stake in China Southern Airlines.

"Most markets around the world have room for one or two major carriers," said Samuel Engel, head of the aviation practice at consulting firm ICF. Delta is "making sure that they're not the loser in the game of musical chairs."