AA Buying $200 Million Stake in China Southern

[Jester]

Sounds like a further commitment to the Chinese market....

"The negotiations focus on an investment of about $200 million by Fort Worth, Texas-based American in China Southern's Hong Kong-listed shares, said the people, asking not to be identified as talks are confidential."

http://www.investors.com/news/ameri...o-buy-china-southern-stake/?hl=1&noRedirect=1

 

[strangiatotheme]

Wonder how much more influence this will have in acquiring slots in the future...

 

[UPNAWAY]

Well that was quick it is official now.

http://news.aa.com/press-releases/p...ic-Relationship-With-China-Southern-Airlines/

 

[jimntx]

I just googled China Southern, and the information that came up said that CS is part of SkyTeam. Is this incorrect? Or, has CS dropped its affiliation with Delta and the news hasn't filtered through to Google yet? Or, was it never true and Google strikes again?

If it is true, why would CS be selling stock to AA and doing codeshares and the like with DL, KLM, and AF? Just curious.

 

[FrugalFlyerv2.0]

Maybe the Chicoms have decided to diversify?

Right now I think all big 3 Chinese carriers (Air China, China Eastern, China Southern) are part of SkyTeam. Also WorldTraveler's favorite ATL-based carrier already owns a small portion of China Eastern.
So it may be that China Southern is doing exactly what China Eastern has done by allowing a USA-based carrier to own a portion of their stock. Maybe the plan could be to eventually have one major Chinese airline as a member of each global airline alliance? Who knows, maybe eventually CZ will join 1-world?

 

[jimntx]

I don't think it's possible for any airline to be part of multiple affinity groups. Codeshare, yes. (Alaska codeshared with both DL and AA for years. Still do, but reduced.) Commit to a travel group, no. What would be the benefit to joining Skyteam and OneWorld when those offer competing feed to you? For that matter what would be the benefit to other Skyteam airlines if you were feeding any of your traffic to one of their competitors?

 

[IORFA]

Parker said in the RDU crew news that the China Southern investment involved an improved slot pair for LAX-PEK. No comment about an improved time for ORD. Personally, I don't see the late ORD-PEK flight being that big of a deal. It gives people an option of going earlier through DFW or later in the day through ORD. Nobody asked about slots specifically, so it could also include an earlier slot for ORD as well. We'll have to wait and find out I guess.

 

[eolesen]

I don't think it's possible for any airline to be part of multiple affinity groups. Codeshare, yes. (Alaska codeshared with both DL and AA for years. Still do, but reduced.) Commit to a travel group, no. What would be the benefit to joining Skyteam and OneWorld when those offer competing feed to you? For that matter what would be the benefit to other Skyteam airlines if you were feeding any of your traffic to one of their competitors?

I had an inside view on CZ's long term strategy when I was working there a few years ago, and at the time they had little interest in what Skyteam offered in terms of connectivity beyond China. All they wanted was feed into their domestic China network. So, keeping their affinity with Skyteam and doing a codeshare with AA fits right into that mindset.

BTW, China Southern it's one of only two client airlines I ever refused to fly as a consultant. The other was China Eastern.

 

[jimntx]

But, to be clear, CZ does not belong to both Skyteam and OneWorld (or do they?). My point was that an earlier poster said that CZ was a member of all 3 major affinity groups. ! affinity group and codeshares with other airlines yes. Membership in multiple affinity groups no. However, I'm just guessing on that. Is it possible for an airline to belong to both Skyteam and OneWorld?

 

[FrugalFlyerv2.0]

jimntx,
I think you may be referring to a post of mine. I said that currently all 3 major Chinese airlines are a part of SkyTeam. Not that 1 airline was a part of 3 alliances.

 

[eolesen]

Can't tell you for 100% certainty, but I don't think any of the three major alliances would allow double membership. CP had to exit oneworld when they were bought by AC, JJ had to leave Star when they merged with LA, and US had to leave Star when they merged with AA. I don't think it was an option to stay behind or even have an overlap for transitioning...

And, for the record, Frugal, you may be confusing China Airlines (CI) with Air China (CA). CI is from Taiwan, not the PRC.

CA is part of Star but has a cross-investment with CX. CI is part of Skyteam.

Cranky Flyer today is speculating that CX will move to Star Alliance (CX just did an expanded partnership with LH and has a cross investment with CA), and that CZ will exit Skyteam for Oneworld.

That will result in each of the state owned airlines being in all three alliances.

 

[jimntx]

It's what I thought. I can't think of any reason to allow multiple membership in affinity groups. Of what benefit would it be to the group to have some of your possible feeder traffic going to a competitor. Frugal and E, remember you're talking to an English major. You just said it again that each state owned airline was in all 3 alliances. What I think you meant to say is that each alliance will now have a state-owned airline as a member (and by implication...all of the state owned airlines would belong to an alliance). But that is not the same as saying "this will result in each of the state owned airline being in all three alliances."

This is the sort of administrivia that helps lawyers make a living.

 

[eolesen]

Mea culpa on the grammar.

It will result in the state owned airlines each being in one of the three major alliances.

 

[commavia]

It's a logical tie-up that provides, at relatively minimal cost, the opportunity for a win-win for both sides. Both AA and China Southern provide each other with something that neither can achieve independently.

AA gets access to domestic feed into interior China from its coastal access points at PEK/PVG, plus - almost certainly - access to a pool of slots at PEK to facilitate the now-delayed new LAX-PEK route, plus possibly re-time ORD-PEK to a more optimal schedule. In China Southern's case, effectively locked out of PEK/PVG-U.S. because of the Chinese government's de facto "one state airline, one route" policy and the dominance of politically-connected Air China, they get access to nonstop China-U.S. flights to feed their domestic network, plus connectivity into the U.S. beyond their existing CAN-U.S. gateways.

I think all the concern and commentary about the impact on alliances, and Cathay Pacific in particular, are overstated. Setting aside the fact that global alliances in general seem to mean less and less these days, AA will almost certainly have a very different - and complimentary - relationship with China Southern compared to Cathay Pacific. AA doesn't rely much on Cathay Pacific for access into China now, anyway, so little change here.