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Yesterday, American Airlines finalized a deal to acquire a minority stake in China Southern Airlines, totaling $200 million. The deal will connect the world’s largest carrier with China’s largest. Along with buying a 2.68% stake in the Hong Kong-based company’s total issued shares, the two airlines agreed to a codeshare, even though they are members in competing alliances (AA in Oneworld and CZ in SkyTeam).
According to Bloomberg, China Southern will issue 270.6 million shares to American at HKD 5.74 (~$0.74) apiece. With the agreement, AA is increasing its presence in China, which is a must, given the projected increase in passengers. According to the International Air Transport Association, China is expected to surpass the US to become the largest market for commercial flights in terms of passengers by 2024.
American joins the likes of Cathay Pacific and Delta Air Lines, which both own stakes in China-based airlines. Cathay owns about 18% of Air China, and Delta acquired a minority stake in China Eastern in 2015.
This is a smart move by AA, which is looking to diversify its portfolio. By adding a codeshare agreement with a China-based carrier, AA is now opening its options to diversify its route network and capitalize on the growing Chinese market. As of this writing, there are no award redemption options with China Southern, but we’ll be sure to let you know when there are developments in this story.
Featured image courtesy of James D. Morgan via Getty Images.
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