China Southern to quit SkyTeam, strengthen American partnership

SHANGHAI/CHICAGO (Reuters) - China Southern Airlines 600029.SS1055.HK plans to depart the SkyTeam airline alliance, it said on Thursday, opening the potential for the carrier to become a member of the oneworld group alongside strategic partner American Airlines Group Inc AAL.O.

FILE PHOTO: The company logo of China Southern Airlines is displayed at a news conference in Hong Kong, China March 27, 2018. REUTERS/Bobby Yip/File Photo

Oneworld and SkyTeam are two of three global airline alliances that provide reciprocal benefits for passengers such as lounge usage and frequent flyer points and give airlines transfer passengers from partners in a boost to revenue. Star Alliance is the third.

American spent $200 million on a minority stake in China Southern last year with an eye to growing in the booming Chinese travel market, but the benefits of the partnership have been stalled in part by the Chinese carrier’s presence in rival alliance SkyTeam.

China Southern said it will leave SkyTeam on Jan. 1 to develop its own strategy. It said it would strengthen its partnership with American, but did not specify any plans to join oneworld.

“This news presents a great opportunity for us to continue to expand our relationship with the largest airline in China,” American Airlines said in a statement. The two companies launched a reciprocal codeshare agreement earlier this year.

One source, who spoke on condition of anonymity, told Reuters that China Southern would consider joining oneworld in the future.

Aside from American, members of oneworld include British Airways ICAG.L, Cathay Pacific 0293.HK, Qantas Airways QAN.AX, Japan Airlines 9201.T and LATAM Airlines LTM.SN.

“Our members will assess in due course the potential implications for oneworld of China Southern’s announcement today that it is to leave SkyTeam,” oneworld said in a statement.

SkyTeam - which includes Delta Air Lines Inc DAL.N and Air France KLM SA AIRF.PA - has said it will work with China Southern to ensure a seamless transition for all customers and partners - a process that will run throughout 2019 and be completed by the year-end.

SkyTeam already has another big Chinese carrier, China Eastern Airlines Corp Ltd 600115.SS, as a member. It is unusual to have two rival carriers within the same alliance.

Xiamen Airlines Co Ltd, a subsidiary of China Southern that is also a SkyTeam member, has no plans to quit the alliance, Xiamen spokesman Qiu Dapeng said on Thursday.

U.S. airlines have so far struggled to gain a foothold in China, scaling back routes amid tough competition from state-backed Chinese rivals that are aggressively expanding their fleets with cut-price tickets.

Beijing plans to open its second international airport, Beijing Daxing International, in 2019.

Reporting by Brenda Goh in Shanghai, Tracy Rucinski in Chicago, Jamie Freed in Singapore, Stella Qiu and Yilei Sun in Beijing; Editing by Frances Kerry and Matthew Lewis