What: Shares of LATAM Airlines Group SA (NYSE:LFL) were soaring today, after Qatar Airways agreed to take up to a 10% stake in the company. The stock jumped as much as 28% today and closed the session up 10.4%.
So what: The two companies announced the deal this morning, as the Qatari airline said it would make a $613 million investment in Latin America's biggest airline. The agreement is just the latest step Qatar Airways has taken to expand after it purchased International Airlines Group last year, which owns British Airways, and it's also expected to take a 49% stake in Meridiana, an Italian airline.
The deal helps shore up LATAM at a time when it's struggling because of the commodity bust and weak economies in Brazil, Venezuela, and other parts of South America.
Now what: The agreement allows Qatar Airways to acquire 10% of the company, pending a capital injection of $613 million. It would be issued stock at 10% a share. LATAM CEO Enrique Cueto said, "In addition to strengthening our financial position, [this deal] will allow us to explore new opportunities for connectivity with Asia and the Middle East."
While the partnership with Qatar won't turn around LATAM's financial losses in the near future, over the long term it should provide a boost to the struggling carrier.