How do you get a foot in the world’s soon-to-be-biggest aviation market in the face of official intransigence from its government? American Airlines Group
How do you get a foot in the world’s soon-to-be-biggest aviation market in the face of official intransigence from its government? American Airlines Group Inc. thinks it’s found a way.
The world’s biggest airline is in talks to take a stake of about $200 million in China Southern Airlines Co. via a private placement , people familiar with the matter told Bloomberg News.
To a carrier with more than $40 billion of revenue over the past 12 months, the sum is a bagatelle — barely enough to purchase a single Boeing Co. 787. With China Southern’s Shanghai- and Hong Kong-listed shares collectively worth about $10 billion, the amount would be barely enough to net American a 2 percent stake.
It’s in the high-stakes diplomacy of international aviation that the transaction makes most sense. American has been a laggard on routes across the Pacific relative to Delta Air Lines Inc. and United Continental Holdings Inc. — but it’s been trying to catch up in recent years, especially as a loosening of visa restrictions between China and the U. S. has spurred travel demand.
That shift has been stymied because airlines in China and the U. S. are already butting up against hard caps on flight frequencies in their 2007 air transport agreement. There just aren’t enough slots available under the treaty to meet the forecast demand for travel between the countries.
The problem is particularly acute for American, which last month petitioned the U. S. Department of Transport for extra time to start services on one of the last available routes from Los Angeles to Beijing:
The difficulties that U.
