American Airlines Group Inc (NASDAQ:AAL) is allegedly in debate to invest $200 million in Chinese carrier China Southern Airlines Company, this will extensively expand the Dallas-based American, according to a published report.
According to Bloomberg News, the discussions are likely to end successfully. The promising venture would significantly rate China Southern at about $10 billion. Under the proposed agreement the American would acquire a non-voting seat on the Chinese carrier’s board.
AAL is a second-largest airline in the world, with over 6,700 flights per day to nearly 350 destinations in more than 50 nations around the world. However, as some industry experts judge, this may not last for long, as China’s marketplace is growing rapidly and may surpass the American’s by 2024.
According to the latest ranking by International Air Transport Association (IATA) the China Southern is the fifth largest carrier and number one in Asia. The move to buy this stake comes in as an escalating demand for air travel among China’s the rapidly growing number of the middle class which is projected to create the world’s biggest air travel market in the future.
American Airlines serves on a usual day, approximately 3,400 flights between 250 destinations in the whole world. It is managed by AMR Corporation, that also owns American Eagle Airlines and Executive Airlines.
AAL generates profits by flight bookings passengers on its flights. The airline also focuses on reducing its costs per available flight seat mileages which give them extra revenues.
With the challenges facing the air travel industry such as escalating fuel costs, fierce competition from other emerging airlines, AAL
With an industry beholden to fuel costs and fierce competition, American Airlines’ is fighting back to make profits and remain the leading in the industry. The top four competitors to the American Airlines include Southern Airlines Co, Delta Airlines Inc., JetBlue Airways, and Untied Continental Holdings.
On Thursday morning, China Southern has suspended its stocks traded in both Hong Kong awaiting a “possible major strategic cooperation”, the NASDAQ stock exchange statements said. According to exchange data, China Southern has a total market capitalization of HK$15 billion ($2 billion) in Hong Kong.