American Airlines takes $200-M stake in China Southern
HONG KONG/SHANGHAI — China Southern Airlines Co. Ltd said on Tuesday it would issue HK$1.55 billion ($199.6 million) worth of shares to a subsidiary of American Airlines Group, Inc., giving the US airline a stake in China’s largest carrier.
The deal would make American Airlines the second US carrier to own part of a Chinese airline after Delta Air Lines, Inc. bought 3.55% of China Eastern Airlines Corp., for $450 million in 2015.
It also means that China’s three biggest airlines now all have tieups with foreign airlines, something Beijing has encouraged as a way to boost the sector’s global competitiveness. Hong Kong’s Cathay Pacific and Chinese flag carrier Air China, purchased a stake in each other in 2006.
In a filing to the Hong Kong stock exchange, China Southern said it would issue 270.61 million Hong Kong-listed H-shares, representing 2.68% of the enlarged share capital of the airline. The shares would be issued at HK$5.74 apiece, or at a 4.6% premium to the previous close.
“It makes sense to partner with another foreign airline,” said Daiwa Capital Markets analyst Kelvin Lau, citing Air China and China Eastern’s deals.
“But ... because the stakeholding is pretty small, I don’t think it will make any material changes in terms of management.”
The carrier’s mainland-listed shares, which resumed trading after a three- day suspension, jumped as much as 4.3% in early trading to their highest price in 7-1/2 months.
Its Hong Kong-listed shares, which opened higher, were down 1.28% at 0256 GMT.
COOPERATION PLANS
China Southern is China’s biggest airline in terms of passenger numbers. It is a member of the SkyTeam airline alliance and is based in the southern city of Guangzhou.
Among other things, the deal would improve governance, strengthen management, boost competitiveness and help “achieve the strategic goal of building a world- class aviation industry group,” the company’s filing said.
It said the two airlines may also increase cooperation in code- sharing and other areas, including staffing, sales, passenger loyalty programs and sharing airport facilities.
Beijing has vowed to shake up Chinese airlines by implementing mixed- ownership reforms and introducing private capital and strategic investment into its state- owned enterprises to improve efficiency and competitiveness.
Chinese airlines have been aggressively expanding their fleet and international routes as they seek to capitalize on strong growth in outbound Chinese travel that has far outpaced tourism at home.
For American Airlines, the deal could widen access to China, one of the biggest sources of tourists to the United States, and will help it compete with rival Delta, which has invested in foreign carriers in Mexico, Brazil and Britain in recent years. —