Over the last decade, Delta Air Lines (NYSE:DAL) gained a reputation as an innovator in the airline business. Since emerging from bankruptcy in 2007, it kicked off a round of consolidation that helped stabilize the industry while pioneering a more dynamic pricing structure to help legacy carriers better compete with discounters.

The airline has also been a bit of a risk taker, making the unusual move of buying an oil refinery to help ensure adequate jet fuel supplies. Delta has also used its capital to build out its empire, spending billions to acquire stakes in airlines around the globe.

Given current market conditions, that empire building is open to question. The COVID-19 pandemic has sapped global demand for air travel, leaving Delta and airlines around the world scrambling for added liquidity and trying to avoid financial disaster.

It has been a miserable year to be an airline investor. Shares of Delta have lost more than half of their value year to date, but some of Delta's international investments have done far worse.

Airlines are hurting everywhere

In September 2019, Delta sunk nearly $2 billion into Chile's Latam Airlines Group. Less than a year later, Latam is now bankrupt, and the equity Delta owned is likely to be wiped out.

Elsewhere the story is only a little better. Delta in 2012 paid $360 million for a 49% stake in Virgin Atlantic Airways. Its partner in the company, Richard Branson's Virgin Group, has been lobbying the United Kingdom for assistance and selling down other assets to try to keep Virgin Atlantic afloat.

A Delta jet landing at an airport.

Image source: Delta Air Lines.

Delta also owns about 11% of the parent company of Korean Air, investing at least $135 million in various tranches in recent years. State-backed lenders in South Korea have extended that company 1.2 trillion won ($1 billion) in assistance, in part via convertible bonds worth about 11% of the airline. Should those bonds convert, Delta's stake would be diluted.

Other investments, including Delta's 49% stake in Aeromexico -- bought for more than $600 million -- are so far holding up better, but Aeromexico bonds recently have traded at just $0.30 to $0.40 on the dollar, a sign that investors are nervous. Delta also spent $450 million to acquire a stake in China Eastern Airlines, which was hit hard in the early days of the pandemic.

Delta investors don't have to worry about the airline doubling down or increasing its stake in any of these airlines. The company lost more than $400 million in the first quarter and is in no condition to bail out anyone else. And most countries, the United States included, consider airlines to be assets of strategic importance and limit foreign investors to minority stakes.

But the investments Delta has made are billions in cash that the airline could have otherwise had at its disposal now as it tries to weather a severe travel downturn.

Airlines need partners now more than ever

There was a time early in the last decade where the major U.S. airlines were in an arms race of sorts to plot new routes and have their brands flying into airports all around the globe. The pandemic has changed that for the foreseeable future.

Delta, like other airlines, is retiring planes, including its fleet of Boeing 777s that in past years have been responsible for some of its longest flights. Domestic travel is expected to recover first, and as international does slowly return, a lot of that traffic is going to be funneled via partners.

Delta flew to more than 80 destinations outside of North America last summer, including 27 in Europe. In the next few years expect the airline to focus on large markets and airports where it has a partner, including Paris, Amsterdam, London, Santiago, and Seoul, and use those partners to offer connecting service to markets that last year had nonstop service.

CEO Ed Bastian said on Delta's April earnings call that although the airline is "not in a position to be making any financial commitments," he also has no interest in abandoning the partners, either.

"We're very proud of those partnerships and I have no interest in trying to sell them or monetizing them at this point or any time in the future candidly," Bastian said.

Delta's playing the long game

It's easy to play Monday morning quarterback with these investments, especially as the airlines struggle through a liquidity crisis. Truth is, most analysts and investors, me included, applauded Delta at the time, and each one of these investments was an important strategic maneuver.

Delta's investment in Latam helped pry South America's largest airline away from a long-standing alliance with American Airlines Group, and its investment in Virgin Atlantic gave it valuable landing rights at London's congested Heathrow Airport.

The money's gone. The important thing now is for Delta to hold on to the relationships, something Bastian seems determined to do. In a May 27 memo to staff discussing the Latam situation, he said Delta remains "firmly committed to our partnership, which will be important when we rebuild our international network in the recovery."

Delta amassed those stakes to build out its global footprint, not to try to reap capital gains. The wisdom of those investments should be judged years from now by looking at Delta's global network and its ability to attract lucrative corporate accounts because of it, and not based on trading losses during a crisis.