American Airlines buys $200-million stake in China Southern Airlines

Reporting from Beijing — American Airlines has agreed to pay $200 million for a stake in China Southern Airlines, one of the country’s three major state-owned carriers, and expand commercial cooperation.

China Southern Airlines said in an announcement Tuesday through the Hong Kong stock exchange that the purchase will represent 2.76% of its shares.

China Southern said the purchase requires regulatory approval. It said details of closer cooperation have yet to be worked out but might include code-sharing, sales, passenger loyalty programs and sharing airport facilities.

Foreign carriers are forging steadily closer ties with Chinese airlines to gain a bigger share of China’s travel market, which is growing while travel in Europe and North America is leveling off. In exchange, Chinese carriers get access to the experience and management skills of foreign airlines.

China is forecast to overtake North America over the next two decades as the biggest air travel market.

Chinese spending on air travel rose 10% in 2015, compared with 1.7% in the United States, according to the International Air Travel Assn.

China’s overall economic growth is slowing but tourism spending is rising as communist leaders encourage growth of service businesses in an effort to reduce reliance on heavy industry.

Two years ago, Delta Air Lines paid $450 million for 3.55% of China Eastern Airlines. The third major U.S. carrier, United Airlines, has a partnership with Air China, the third major Chinese government-owned airline.

Regulators in both China and the United States are reluctant to allow large foreign ownership stakes or management control of their airlines.

China Southern is the biggest of China’s three major state-owned carriers by passenger volume, but is known for sometimes haphazard service, with flights delayed or canceled with little notice.

China Southern says it operates more than 2,000 flights a day to 224 destinations in 40 countries and regions in Asia, Europe, North America and Africa. It says it carried 115 million passengers in 2016.

The partnership with American Airlines “is expected to provide continuous impetus for the company’s long-term growth,” China Southern’s announcement said.

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UPDATES:

9:40 p.m.: This article was updated with background information on China Southern Airlines.

This article was originally published at 9 p.m.