China Southern wants to deepen American relationship

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November 28, 2017
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China Southern wants to use its relationship with American Airlines to boost routes to the US as speculation mounts it will exit the SkyTeam alliance and join rival oneworld.

American Airlines in March announced a $US200million equity investment in Guangzhou-based China Southern  that brought together two largely complementary networks and gave American a foothold in burgeoning Chinese market.

American is  a founder of oneworld, a major rival to the Delta Air Lines-backed Skyteam.

Delta has a 3.55 per cent stake in Shanghai-based China Eastern and is poised to help the Chinese carrier set up operations at Beijing’s giant second airport, Daxing, when it opens in 2019.

China Southern is also looking to significantly boost its Beijing presence through Daxing and the two airlines will between them control about 80 per cent of passenger traffic at the $US13 billion mega-airport.

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The moves will significantly change the competitive dynamic in a city traditionally dominated by Air China, with China Southern planning to station 250 aircraft at Daxing by 2025.

In a recent televised interview with Bloomberg, China Southern president Tan Wan Geng said the airline’s focus was on the market between China and the US.

Tan said the investment by American in his airline was not big but “the meaning is clear”.

Noting that he wanted to stay within SkyTeam regulations, Tan said the airline wanted more support from the US. He noted the market between China and the US was “the biggest one”.

“So we need strong support and that’s the reason why we set the cooperation relationship, the strategy, with AA,’’ he said.

“It’s just the beginning. In the future China Southern will fly more flights to the United States and AA will fly more too to China.

“I do think we have a lot of potential space to cooperate.”

On the subject of private investors, Tan said the airline had to be careful because the topic involved employees and sensitive matters.

“But I think we’ll do (it),’’ he said.

Speculation China Southern would quit Skyteam gained momentum this week when the South China Morning Post quoted Delta’s Greater China chief, Wong Hong, as saying the alliance had to accept the reality of potential defection but it was a something for China Southern to think through and decide.

Oneworld chief executive Rob Gurney said China Southern had not been in contact to discuss membership.