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March 28, 2017

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Southern in talks over AA tie-up

CHINA Southern Airlines is in talks over a tie-up with American Airlines that could involve the US carrier taking a stake in the state-owned airline, boosting routes between the world’s two largest travel markets.

The potential deal would make AA the second US carrier to own part of a Chinese airline after Delta Air Lines Inc bought 3.55 percent of China Eastern Airlines Corp for US$450 million in 2015.

China Southern, the country’s largest carrier by passenger numbers, said in a filing that the tie-up could involve a share issue as well as other forms of cooperation, but that it was still subject to shareholder and government approval.

The tie-up comes as Beijing has vowed to shake up its airlines by implementing mixed-ownership reforms and introducing private capital and strategic investment into its state-owned enterprises in a bid to improve efficiency and competitiveness.

BOCOM International analyst Geoffrey Cheng said the tie-up was the best way for the two carriers to offer consumers more flights overseas given the lack of new flight slots available.

He said any equity stake, expected to be similar in size to the Delta deal, would help cement ties between the airlines, but in reality would be little more than a glorified code-sharing deal by which airlines pool resources and share flights.


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