Delta Air Lines, trust offer to raise Aeromexico stake to up to 49 percent

Delta Air Lines Inc said Wednesday it intends to buy up to an additional 32 percent of Grupo Aeromexico SAB de CV, in what could be a nearly US$600 million cash deal that strengthens its grip on a fast-growing market.

The investment could raise Delta's 4.1-percent stake in Aeromexico to 49 percent, if Delta and its pension trust also exercise share purchase options they hold. Delta offered to pay some 52 percent above the Mexican airline's closing price of 28.74 Mexican pesos.

The move reflects an attempt by Delta to raise competition with American Airlines Group Inc, which has been a larger player in travel to Latin America. It follows a recent application by Delta and Aeromexico for immunity from U.S. antitrust law so they can coordinate schedules and prices for flights, making connections more attractive for customers.

Aeromexico said in a news release that it was informed of Delta's intentions. The deal remains subject to approval by both companies' boards.

"This new investment demonstrates Delta's confidence in Mexico's future," Delta's President Ed Bastian, who sits on Aeromexico's board, said in a news release.

Passenger traffic between the United States and Mexico is expected to grow on average 4.7 percent per year through 2035, according to a forecast this year by the U.S. Federal Aviation Administration. That is the highest rate of growth for travel between the United States and any country in Latin America.

Shares of the Atlanta-based airline were flat in after-market trading.

Delta is "wisely using some of the cash generated from low fuel prices" to get ahead of a U.S.-Mexico aviation pact that enables more flights between the countries, said Sterne Agee CRT analyst Adam Hackel.

Delta, the third-largest U.S. airline by capacity, also owns a 49 percent stake in Virgin Atlantic Airways Ltd VA.UL and just under 10 percent of Brazil's Gol Linhas Aereas Inteligentes SA.