A $10.2bn deal to supply services to a $2.5bn deal with Delta’s US subsidiary has led to an impressive rebound for the Delta parent company.
Key points:Delta said its $2bn transaction with Delta will give the airline a $1bn cash injectionThe company expects to complete the deal by early MarchThe deal is expected to close in early MarchIt has helped Delta gain market share from its rivals as well as become the second-largest US airline after United to launch its own direct-to-consumer service in recent years.
But the airline was still struggling to catch up with its rivals, which included Delta, Southwest and American.
Delta’s deal with a Chinese company to supply direct-from-the-ground service to a Delta-owned US airline has helped it to become the third-largest domestic airline in the US and one of the most profitable companies in the industry.
Delta Chief Executive Officer Doug Parker said on Tuesday that the deal with the Chinese company had helped the airline grow its revenue by $1.5 billion in the last quarter, but also boosted its margins by about two-thirds.
“We are not in a position to discuss specific results of the transaction, but I can tell you that we expect to complete it by early next week,” Parker said.
He said that while the Delta deal was not yet finalized, it had “helped us to grow our revenue by about $1 billion in Q2”.
“Our business is in a very good place, but we are still in a little bit of a transition stage, and we have to start moving forward,” Parker added.
Delta said the deal would give the company a $9.6bn cash infusion, which is about 40% of its previously announced $5.6b capital expenditure plan.
“The deal will help us to further accelerate our expansion and help us take Delta into the next phase of growth,” Parker told investors.
The deal with United is expected shortly after the airline’s Q2 earnings report, which are due in the next few days.
The airline had previously been struggling to get a deal with its competitors to carry its direct-in-flight service, which has become the main way passengers get from Boston to New York.
While Delta’s direct-booking service was able to gain some ground, the carrier has struggled to build up its customer base.
The US airline is also under pressure to get the number of direct flights into the United States down as the number flying domestically has fallen.
United has said it has a $7bn backlog of flights, which it hopes to close this year.
As the United deal opens, the US carrier is already the largest domestic carrier, ahead of its American counterpart, which owns Delta.