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American Air to Invest $200 Million in China Southern Deal

Published on Mar 28 2017 11:31 AM in General Industry tagged: American Airlines / China Southern Airlines / International Air Transport Association

American Air to Invest $200 Million in China Southern Deal

American Airlines Group Inc. agreed to acquire a minority stake in China Southern Airlines Co. for $200 million, cementing a partnership between the top carriers in the U.S. and Asia.

China Southern will issue 270.6 million shares in its Hong Kong-listed company to the world’s largest airline at HK$5.74 apiece, the Guangzhou-based carrier said in a stock exchange statement Tuesday. That is a premium of 5.3 per cent over the closing price before Bloomberg News reported the talks last week. The two airlines also agreed on code sharing, according to the statement.

American Air will hold 2.68 percent of China Southern’s total issued shares, Asia’s largest carrier by passengers said in the filing.

The agreement will boost Fort Worth, Texas-based 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 US to become the biggest in terms of passengers by 2024. The deal will also help the expansion plans of China Southern, which indicated in January that it was considering bringing in strategic investors.

China Southern is the last of the nation’s top three airlines to bring in a non-mainland Chinese strategic investor. Cathay Pacific Airways Ltd., based in Hong Kong, owns about 18 percent of flag carrier Air China Ltd. Delta Air Lines acquired a minority stake in China Eastern Airlines in 2015.

“For the price of one widebody aircraft, American could finally be securing a major mainland partner, but it’s a long road,” said Will Horton, a senior analyst at the CAPA Centre for Aviation in Hong Kong. The two “need to show over the long term this isn’t an alliance of the leftovers.”

China Southern has a market value of about $10 billion.

News by Bloomberg, edited by Hospitality Ireland

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