China Southern Airlines may sell stake to American Airlines
27 March 2017
China Southern Airlines is discussing a tie-up with American Airlines that could involve the US carrier taking a stake in the state-owned Chinese airline, as it aims to increase routes between the world's two largest travel markets.
With the deal, American Airlines would become the second US carrier to own part of a Chinese airline after Delta Air Lines bought a 3.55 per cent of China Eastern Airlines Corp for $450 million in 2015.
According to the filing of China Southern, which is the country's largest carrier by passenger numbers, the tie-up could involve a share issue as also other forms of cooperation, but it is still subject to shareholder and government approval.
The company's Hong Kong-listed shares surged 5.3 per cent in early morning trading yesterday, while its mainland-listed shares remained suspended.
The tie-up proposal comes as Beijing had vowed to shake up its airlines with implementation of mixed-ownership reforms and introduction of private capital and strategic investment into its state-owned enterprises as it sought to improve efficiency and competitiveness.
According to BOCOM International analyst Geoffrey Cheng, the tie-up was the best way for the two companies to offer additional flights to consumers overseas given the paucity of new flight slots.
According to commentators, with the deal, American would be able to strengthen its presence in the Chinese market after rival Delta Air Lines Inc acquired a minority stake in China Eastern Airlines Corp in 2015.
''All big US carriers will be making deals of one kind or another with major airlines all over Asia and certainly within China,'' Robert Crandall, former chairman of American, told Bloomberg Television yesterday. ''These things are going to grow and because of the network nature of the airline industry, everybody is going to play and everybody needs to play.''