Thursday, March 23, 2017

American Airlines to buy stake in China Southern

American Airlines is in negotiations to buy a stake in China Southern Airlines in an effort to strengthen both carriers’ position on Sino-US routes, two industry sources told ATW.

According to news reports, Fort Worth, Texas-based American plans to buy Guangzhou-based China Southern’s H shares, released by the Hong Kong Stock Exchange, via a $200 million investment.

China Southern is worth about $10 billion at market value. As a stakeholder, American would be able to nominate an observer without voting rights on to China Southern’s board. However, industry sources told ATW that since a final agreement had not yet been reached, specific details of the deal could still change or ultimately fail.

American Airlines declined to comment.

China Southern suspended stock trading March 23 because it was “planning an important strategic cooperation deal,” according to a company statement. However, the airline went on to say it would “reveal the important strategic cooperation deal within five working days and resume stock trading.”

At its annual meeting in January, China Southern said it would “focus on conducting cross shareholding with global leading players or set up a joint subsidiary with them to promote the reforms of diversifying its ownerships [required by Beijing] in 2017.”

Industry analysts pointed out both carriers could enhance their positions on the fiercely competitive Sino-US routes.

According to China Merchants Securities, Beijing-based Air China, which holds a 20% market share of Sino-US routes, has a strategic cooperation deal with fellow Star Alliance member United Airlines, which has a 22% market share. Shanghai-based China Eastern Airlines, which finalized a an expanded partnership agreement with Atlanta-based Delta Air Lines in 2015, has a 17% market share, while SkyTeam member Delta has a 10% market share.

(Katie Cantle - ATWOnline News)

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