China Southern announces tie-up deal with American Airlines

BEIJING - China Southern Airlines, the country's biggest carrier by passenger volume, said Tuesday that American Airlines would acquire a stake in a tie-up deal under the mixed-ownership reform drive.

The Guangzhou-based operator will sell more than 270 million Hong Kong-listed shares, or 8.83 percent, to American Airlines, according to a statement by China Southern filed with the Hong Kong stock exchange.

American Airlines will nominate an observer without voting rights to China Southern's board, said the statement.

Right after the announcement, shares of China Southern fell 2.19 percent in Hong Kong but were 1.65 percent higher in Shanghai.

China Southern said in the statement that the two companies may seek to increase cooperation in code-sharing, staffing, sales, passenger loyalty programs and sharing of airport facilities.

For American Airlines, the deal will strengthen its presence in the Chinese market after rival Delta Airlines acquired a minority stake in China Eastern Airlines in 2015.

The deal made China Southern the last of the nation's top three airlines to bring in a non-Chinese mainland strategic investor. Cathay Pacific Airways, which is based in Hong Kong, owns stakes of flag carrier Air China.

The deal also signals a bold move from China Southern Airlines to push for mixed-ownership reform, a critical task in state-owned enterprise (SOEs) reform for 2017.

China will take substantial steps in mixed-ownership reform across the electricity, oil, natural gas, railways, civil aviation, telecommunications and military industries, according to a statement issued after the Central Economic Work Conference last December.