American Airlines officially announced a $200 million investment in China Southern Airlines on Tuesday, expanding the Fort Worth-based carrier’s presence in the growing Asian travel market.
The deal, first reported last week by Bloomberg News, includes a $200 million equity investment in the Chinese carrier with the expectation that the airlines will begin codesharing and interline agreements later this year.
“We are two of the biggest carriers in the world and our networks are highly complementary, with the potential to offer China Southern and American customers an unmatched range of destinations in two critical markets for business and leisure travelers,” said American’s president, Robert Isom.
China Southern’s largest hub is in Guangzhou where it operates most of its transpacific flights. It is the largest carrier in Asia in terms of passenger traffic. American does not fly to Guangzhou from the U.S. but offers flights from its hub in Dallas/Fort Worth to Hong Kong, Beijing and Shanghai. American also has flights to those cities from Los Angeles and Chicago.
The carriers said they expect to begin codesharing on flights later this year, which enables passengers to earn and redeem frequent-flyer miles from flights on both airlines.
For American, a deal would strengthen its presence in the Chinese market after rival Delta Air Lines acquired a minority stake in China Eastern Airlines in 2015. China Southern would be the last of the nation’s top three airlines to bring in a non-mainland Chinese strategic investor. Cathay Pacific Airways, based in Hong Kong and part of American’s Oneworld alliance, owns about 18 percent of flag carrier Air China.
“All big U.S. carriers will be making deals of one kind or another with major airlines all over Asia and certainly within China,” Robert Crandall, former chairman of American, said in a Bloomberg Television interview on Monday. “These things are going to grow and because of the network nature of the airline industry, everybody is going to play and everybody needs to play.”
This article contains material from Bloomberg News.