Blog Coverage American Airlines Takes a 2.68% Stake in China Southern Airlines for Approximately $200 Million

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LONDON, UK / ACCESSWIRE / March 29, 2017 / Active Wall St. blog coverage looks at the headline from American Airlines Group Inc. (NASDAQ: AAL) as the Company announced on March 28, 2017, that it will make a US$200 million equity investment in China Southern Airlines, creating a strong foundation for a long-term relationship between two of the world’s biggest carriers, marking the second foray by a US carrier into the world’s fastest-growing commercial aviation sector. Register with us now for your free membership and blog access at:

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One of American Airlines Group’s competitors within the Major Airlines space, Delta Air Lines, Inc. (NYSE: DAL), is estimated to report earnings on April 13, 2017. AWS will be initiating a research report on Delta Air Lines following the release of its next earnings results.

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Two Behemoths

American Airlines is the largest airline in the world and together with American Eagle offers an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries.

China Southern is the largest airline in China, with over 100,000 employees around the globe. China Southern ranked 1st in Asia and 4th in the world with regards to traffic volume and fleet size in 2016. China Southern’s primary hub is located in Guangzhou (CAN) with the majority of its transpacific flights positioned there, while American Airlines flies to Beijing (PEK) and Shanghai (PVG) from its hubs in Chicago (ORD), Dallas Fort Worth (DFW) and Los Angeles (LAX). The carriers are planning to give travellers not only the amenities, features, and the products that they want at different price points, but also a bigger network that serves the markets to which they want to travel.

“China Southern’s extensive network within China touches developing and thriving markets that only a Chinese carrier can reach and they have a reputation and record of excellence,” said Robert Isom, President of American Airlines, “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 travellers. This investment will allow us to build a relationship that will benefit our teams, the communities we serve and the millions of customers around the globe who travel with us each day.”

“We’re pleased to begin this relationship to better connect two of the world’s largest aviation markets and leading economies. Our cooperation has the possibility to create enormous benefits for our industry and customers around the world as we work to offer them more travel options and better value,” said China Southern Chairman Wang Cheng Shun.

Transaction Details

American Airlines will own around 2.68% of China Southern’s outstanding shares after paying HK$1.55 billion ($199.6 million) to the airline. As per a regulatory filing, in the Hong Kong stock exchange, China Southern will issue 270.61 million Hong Kong-listed H-shares, representing 2.68% of outstanding shares of the airline.

In 2015, Delta Airlines acquired a 3.55% stake in China Eastern Airlines for approximately $450 million.

Moving Forward

Later this year, American Airlines and China Southern are expected to begin codeshare and interline agreements that will provide customers access to many more destinations in China, as well as North and South America. American Airlines’ customers will be able to access nearly 40 destinations beyond Beijing and more than 30 destinations beyond Shanghai. China Southern customers will gain access to almost 80 destinations beyond LAX, San Francisco (SFO), and New York’s Kennedy Airport (JFK) in North and South America. The expected codeshare routes are anticipated to include the ability to earn and redeem AAdvantage® Miles, through-bag checking and the ability to book travel on a single ticket. The planned routes operating under the interline agreement are anticipated to include through-bag checking to the traveller’s final destination.

American Airlines currently offers daily service from DFW to Hong Kong (HKG), PEK and PVG; LAX to HKG and PVG; and ORD to PEK and PVG. All flights to PEK and PVG are operated on the airline’s Boeing 787-8 Dreamliner, while its HKG flights are operated using its Boeing 777-300. American Airlines also has Chinese-speaking flight attendants and offers fully lie-flat seats in first and business class cabins on all of its transpacific flights between China and the US.

Stock Performance

At the close of trading session on Tuesday, March 28, 2017, following the announcement, American Airlines’ share price finished yesterday’s trading session at $42.60, climbing 2.06%. A total volume of 6.18 million shares exchanged hands. The stock has advanced 22.54% and 4.12% in the last six months and past twelve months, respectively. The stock is trading at a PE ratio of 8.92 and has a dividend yield of 0.94%.

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