American Airlines buys stake in China Southern Airlines
- Author: Leroy Wright Mar 29, 2017,
Mar 29, 2017, 1:19
In a filing to the Shanghai Stock Exchange (SSE) on Tuesday, March 28, China Southern said the U.S. carrier had agreed to subscribe to 270,606,272 Subscription Shares valued at HKD5.74 (USD0.74) per Share.
The shares will be issued at HK$5.74 apiece, or at a 4.6 percent premium to the previous close.
The deal gives American a 2.68 percent stake in China Southern and gives the two carriers the green light to move forward with a strategic cooperation.
American Airlines has announced plans to codeshare with China Southern, China's largest airline.
Trading for China Southern Airlines were previously halted on Thursday (March 23) when Bloomberg reported that American Airlines planned to make an investment worth $200m (£158.8m) in the Chinese airline. China Southern customers will gain access to nearly 80 destinations beyond LAX, San Francisco and New York's Kennedy Airport in North and South America.
Based in the city of Guangzhou, state-owned China Southern is Asia's biggest airline by passengers. "It makes sense to partner with another foreign airline", Daiwa Capital Markets analyst Kelvin Lau said per Channel News Asia.
Meanwhile, Beijing promised to shake up Chinese airlines through the implementation of mixed-ownership reforms. The stock, which resumed trading Monday, rose 5.3 percent in Hong Kong to HK$5.74, the highest intraday level since January 4. Delta Air Lines acquired a minority stake in China Eastern Airlines Corp in 2015.
American Airlines' investment will mean it owns slightly less than three per cent of China Southern and is subject to regulatory approval. American has hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. American is a founding member of the oneworld® alliance, whose members serve more than 1,000 destinations with about 14,250 daily flights to over 150 countries. The airline said it operates over 2,000 flights per day.
The companies have not reached a binding or definitive agreement, and the cooperation may or may not proceed, China Southern said in its statement. American has been a laggard on routes across the Pacific relative to Delta Air Lines and United Continental Holdings - but it's been trying to catch up in recent years, especially as a loosening of visa restrictions between China and the US has spurred travel demand.