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American Airlines Prepares for Chinese Investment

American’s parent company could take stake in China Southern Airlines

American Airlines could be preparing to expand their international footprint through an investment in a Chinese carrier. Bloomberg reports the Fort Worth-based parent company of American is in “advanced talks” to purchase a share in China Southern Airlines.

Under the terms of the deal explained by “people familiar with the matter,” American would invest $200 million into the Chinese airline. With China Southern valued at around $10 billion, American would effectively hold a two percent interest. The deal would also allow American to put an “observer” on the China Southern board, but hold no voting rights.

The small purchase could pay in other dividends for both companies. An financial agreement between the two carriers could allow them to expand codesharing and interline agreements, despite belonging to different airline alliances (American in oneworld and China Southern in SkyTeam). In addition, American will have more opportunities to expand into the Asian country, projected to become the world’s largest consumer airline market in seven years by the International Air Transport Association.

Additional indications the deal could be coming include the suspension of China Southern stock trading on markets in Hong Kong and Shanghai. Both stocks were temporarily halted due to the announcement of a “possible major strategic cooperation.”

Neither airline has provided comment to the media about the rumored purchase. Additionally, the deal is not completely settled: insiders at American warn that the potential still exists for the deal to fall apart at the last second. If the investment is finalized, it would mark the second major investment in a Chinese carrier by an American airline. In 2015, Delta Air Lines made a similar investment in SkyTeam partners Aeromexico and China Eastern Airlines.

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