Here’s why American Airlines is buying into a Chinese carrier

 

With China as the fastest-growing aviation, U.S. airlines are eager to make deals to gain entry to the highly regulated market in that country.

American Airlines’ just announced $200-million stake in state-owned China Southern Airlines in the latest example.

The deal will make it a little easier for Americans to travel to China and vice versa because it will provide travelers with a larger flying network and more price options in China and the United States.

“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 travelers,” Robert Isom, president of Texas-based American Airlines said in a statement.

The deal will offer the airlines’ customers “more travel options and better value,” China Southern chairman Wang Chang Shun said.

China Southern’s headquarters and main hub is in Guangzhou, China. American flies from hubs in Chicago, Dallas-Fort Worth (DFW) and Los Angeles (LAX) to Beijing and Shanghai, and from DFW and LAX to Hong Kong.

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China leads the International Air Transport Association’s forecast of the top air passenger markets over the next 20 years. (IATA)

Later this year, the two carriers plan to start codeshare and interline agreements that will offer about 70 new destinations in China to American customers and nearly 80 new stops in North and South America to China Southern customers.

International air travel is expected to nearly double to 7.2 billion passengers by 2035, according to the International Air Transport Association. China is the fastest-growing market, with 1.3 billion new passengers by then. The industry group predicts China will pass North America as the world’s largest aviation market around 2024. (See graph at upper right.)

For the United States, China is the fifth largest tourism generator, bringing well over 2 million visitors a year, according to the National Travel and Tourism Office (NTTO). (See chart at lower right.)

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US travel to China also has increased — up nearly 8 percent to 1.2 million people in 2015, the latest data available from the U.S. Travel Association.

The now defunct Pan American World Airways began flying between the United States and China in 1981, two years after diplomatic relations between the two nations were established. But the expansion of flights has been slow in a competitive process for routes.

The United States doesn’t have an open skies agreement, which allows unrestricted flights in each country, with China. The current US-China bilateral treaty specifies the number of passenger flights allowed.

Other airlines have forged ties with Chinese carriers to gain more access to China’s growing travel market. Last year, United Airlines enhanced a partnership it’s had with Air China since 2003. In 2015, Delta Air Lines paid $450 million for a small stake in China Eastern Airlines.

American, the world’s largest airline, offers nearly 6,700 daily flights to nearly 350 destinations in over 50 countries. It carried over 198 million passengers in 2016.

China Southern, one of three major state-owned carriers in mainland China, operates more than 2,000 daily flights to 208 destinations in 40 countries and regions. It flew 115 million passengers in 2016.

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China Southern Airline’s base in Guangzhou, China. Beijing (at top right of map) and Shanghai (right center of map). (Sheryl Jean with Apple Maps)
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