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Delta Air Lines to Buy 3.55% Stake in China Eastern for $450M

Delta Air Lines is set to buy a 3.55% stake in China Eastern for $450 million, in hopes of taking a minority position in overseas carriers.

Under this new agreement, Delta would invest in China Eastern’s Hong Kong-traded H shares, and get an honorary seat known as an “observer seat” on their board. Their stock has almost tripled over the past calendar year, in a time where many Chinese stocks have gone into a freefall.

Delta has long wanted to strengthen its international business ventures, as they have invested in three foreign airlines in the past four years. Some partners they have already invested in include AeroMéxico, Gol Linhas Aéreas Inteligentes SA in Brazil, and Virgin Atlantic Airways from Singapore Airlines Ltd.

They had previously partnered with China Airlines and its Shanghai Airlines units. China Eastern is a member of the SkyTeam global marketing alliance, which includes other Delta partners Air France-KLM SA and AeroMéxico.

The Chinese airline and Delta will share codes and passengers for both flights between China and the United States and domestic flights for the two countries. This move combines the two most powerful nations into a transportation superpower.

"The cooperation of the parties is based on a global vision and joint strategic blueprint. The parties will take advantage of their respective route networks, flight services, relevant businesses and advantageous resources to fully connect the world's two top economies as well as two top air transportation markets,”
said Shaoyong Liu, China Eastern CEO.

Delta was also delighted with the idea of the partnership. They believe the two of them together will create a profitable and long-standing relationship that provides top-notch customer service.

This would be the first time a US carrier owned part of a Chinese airline. The deal still requires approval by the boards of both companies.

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