Delta Air line (NYSE: DAL) agreed to acquire 3.55 percent stake of China Eastern Airlines Corp. (NYSE: CEA) for $450 million to extend international operations and expand the U.S. carrier to the Chinese airline.
The Atlanta-based airline started as an aerial crop dusting operation called Huff Daland Dusters in 1924 and now transports over 160 million passengers each year, becoming one of the largest global airlines.
Since 2011, Delta has invested in three foreign airlines including China Eastern and Shanghai Airlines unit. The partnership allowed code-sharing and the transferring of passengers between the domestic routes of the two nations. China Eastern operates 35 weekly flights from Shanghai to Los Angeles, New York, San Francisco and Honolulu, and three flights a week from Nanjing to Los Angeles. Delta this summer will operate 28 weekly flights to Shanghai.
The deal will allow the company to expand their international airline across foreign countries with efficiency, sharing flight codes on 80 plus routes and receive an “observer” seat on China Eastern’s board. Delta will purchase 465.91 million H-shares of state-owned China Eastern as part of a subscription agreement for HK$3.489 billion ($450.17 million). "Delta's relationship with China Eastern is long-standing. We share a vision that will create the most profitable, enduring franchise between the U.S. and China," said Delta Chief Executive Richard Anderson. The deal requires the approval of both boards of the company, however, they did not reveal when that is expected to occur.