China Southern confirms stake sale to American Airlines

China Southern's Hong Kong-listed shares jumped as much as 5.3 percent in early morning trading on Monday before closing at HK$5.49, while its mainland-listed shares remained suspended.

China Southern Airlines Co said it is in talks to sell a stake to American Airlines Group Inc, betting big on the forecast of massive demand for travel between the two countries.

The agreement will boost American Air's presence in China, one of the world's fastest-growing aviation markets, which the International Air Transport Association predicts will surpass the U.S. to become the biggest in terms of passengers by 2024.

"The share purchase is kind of cosmetic in a way, because the whole thing is about code sharing and putting passengers from China onto the USA aircraft", said Geoffrey Cheng, the head of transportation and industrial research at Bocom International in Hong Kong.

China Southern is the last of the nation's top three airlines to bring in a non-mainland Chinese strategic investor.

Among other things, the deal would help China Southern improve its governance, strengthen management, boost its competitiveness and help "achieve the strategic goal of building a world-class aviation industry group", the filing said. A potential deal would mark a business agreement between the world's largest airline by fleet size and revenue and its Chinese equivalent in Asia. Cathay Pacific Airways Ltd, which is based in Hong Kong, owns about 18 percent of flag carrier Air China Ltd. It also has been adding routes to Australia and New Zealand. A tie-up will increase China Southern's visibility in the US, said Will Horton, a senior analyst at the CAPA Centre for Aviation in Hong Kong. Delta Air Lines acquired a minority stake in China Eastern Airlines Corp in 2015. It is a member of the SkyTeam airline alliance and is based in the southern city of Guangzhou.

  • Zachary Reyes