American Airlines Invests in China Southern

By Kristina Harrington

Courtesy AP Images

On March 29th, American Airlines announced an almost $200 million dollar investment in China Southern Airlines. They are acquiring a minority stake of 2.68% of the Asian carrier, forging a strong partnership between the two airlines. Their agreement will raise the presence of American Airlines throughout China, and will boost the prevalence of American Airlines in the ever growing market.

Market Value

American has long lacked Asian partnerships since its entrance to the market almost 11 years ago, aside from its code-share with Hainan, which has turned out to be relatively unprofitable. This is where China Southern comes into play: China Southern is the continent’s largest airline by passenger traffic, which transported more than 110 million people on its fleet of 520 aircraft in 2015,  and has a net worth of close to $10 billion.

Since American has stated in the past that Asia is one of its only unprofitable regions, this deal – largely consisting of code-share agreements – is expected to grow a “strategic relationship,” as described by the carrier. The two airlines will begin to implement the new agreement at a later date this year. Being two of the largest carriers in the world, this relationship is expected to exponentially increase profits for the two companies. Historically lagging behind both Delta and United, AA now has the chance to excel in both the Chinese and Pacific markets in the coming years.

Getty Images | China Southern Boeing 787

Effects of the Deal

For American passengers, once this agreement takes full effect, getting to Beijing, Shanghai and beyond will become much easier. Code-sharing and interline agreements will most likely include both airlines in one ticket, and frequent flier miles can be earned. On top of this, through-bag checking is expected to be included.

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Getty Images/Tom Pennington | Entrance of DFW Terminal D

Overall, this is a step towards American prevalence within both Chinese and Pacific markets. With Asia’s growing aviation market (expected to surpass the United States around 2024, according to Bloomberg), having stake in a large carrier will likely come to benefit American Airlines. The airline now has the chance to compete with both Delta and United in Asian markets as this deal takes effect and grows.