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Business

New cross-alliance partnership takes off

American Airlines, China Southern Airlines set to expand trans-Pacific routes

NEW YORK -- American Airlines said on Tuesday it will invest $200 million in China Southern Airlines, China's largest airline. The move will allow the carriers to offer passengers more routes by sharing flights, while cooperating in other areas as well.

Although they belong to different airline alliances, they have decided on a cross-alliance partnership in anticipation of growing demand for routes between China and the U.S. American is expected to acquire a small percentage of its Chinese partner.

"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," American President Robert Isom said in a statement.

According to the International Air Transport Association, American was the world's biggest airline by passenger volume in 2015 with China Southern fourth.

The two plan to start offering code-share flights to each other. American's passengers will be able to fly China Southern beyond Beijing to some 40 destinations within China and about 30 beyond Shanghai. China Southern's passengers will gain access to some 80 destinations in North and South America.

In a similar move, Delta Air Lines invested $450 million in China Eastern Airlines in 2015, after which the two began offering code-share flights. Both are members of the SkyTeam alliance. 

Among U.S. carriers, United Airlines -- a Star Alliance member -- currently has the largest number of direct flights between the U.S. and China. It partners with Air China in the same alliance.

American had long partnered with its oneworld alliance ally Hong Kong-based Cathay Pacific Airways, and offered a limited number of routes within China.

Since China Eastern teamed up with Delta, China Southern was left in limbo within SkyTeam. It apparently concluded that a cross-alliance partnership with American was needed to take advantage of the growing number of trans-Pacific flights. China Southern may move to oneworld in the future.

The three major U.S. airlines are collaborating more with their Chinese rivals, not just to increase flights to China, but also to expand over the long-term into Southeast Asia via partner carriers.

Major Chinese airports are gearing up to serve as future hubs in Asia. Japan's Narita Airport, which has long been a major transit point for passengers on U.S. flights, may see its importance decline.

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