China Southern in Talks with American Airlines for possible Tie-up

China Southern Airlines Co. Ltd. (NYSE: ZNH) is looking to expand its business by selling some states to American Airlines Group Inc. (NASDAQ: AAL), the world’s biggest carrier.

China Southern, the largest airline by passengers in China, said it was in talks with American Airline about “major strategic cooperation” that may involve proposed issue of shares of the company and other business cooperation.

The stock rose 0.7 percent to HK$5.49 on Monday in Hong Kong. It is the highest level since Aug.16. While its mainland-listed shares remained suspended.

“The share purchase is kind of cosmetic in a way, because the whole thing is about code sharing and putting passengers from China onto the U.S. aircraft,” said Geoffrey Cheng, the head of transportation and industrial research at Bocom International in Hong Kong.

This would be the second tie up for Chinese and American airlines. In 2015, Delta Air Lines Inc. acquired a minority stake in China Eastern Airline Corp.

The agreement will boost China Southern global business. The carrier has flights from Guangzhou to New York, Boston, Chicago and Hawaii. It also has been adding routes to Australia and New Zealand.

For American Airlines, the agreement will help it compete with rival Delta by capturing more traffic between the United States and China.

But the deal would be subject to board and regulatory approvals, according to China Southern’s stock exchange filing in Hong Kong.

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