American Airlines Deepens Its Presence in the Chinese Airline Market

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by XIAOYI WANG
China Southern Airlines is the largest airline in China in terms of fleet size, revenue, and passengers served. [Image: Wikimedia user Humphrey Manusiwa]

In late March, American Airlines announced a $200 million investment in China Southern Airlines, the largest airline in China. The deal includes a $200 million equity investment in the Chinese carrier with the expectation that the airlines will begin codesharing and interline agreements later this year. The investment, described as a strategic relationship, provides American Airlines with a foothold in the fast-growing Chinese travel market.

Recognizing China’s large potential in the aviation market, major US airlines have recently begun establishing partnerships with Chinese airlines. In 2015, Delta Air Lines bought 3.55 percent of China Eastern Airlines Corporation for $450 million, making it the first US carrier to own part of a Chinese airline. Delta also has a partnership with China Southern through its SkyTeam alliance. The United Airlines partners with Air China through the Star Alliance.

Non-stop air service between the United States and China has grown rapidly in recent years. Between 2006 and 2016, the number of seats on service between the two countries grew almost fourfold: from 1.2 million to almost 4.5 million. The most immediate impact of this increase is that US passengers can easily travel to cities in China and will have access to nearly 40 Chinese destinations beyond Beijing, and Shanghai. At the same time, Chinese visitors will have access to an unmatched range of destinations in the United States.  In 2016, 3.1 million Chinese tourists visited the United States, making it the fourth largest source of international travelers, and contributing an estimated $24 billion to the US economy. In 2016, the United States and China launched the 2016 US-China Tourism Year in Beijing to maximize the mutual economic and social benefits of increased international travel.

As the two largest economies in the world, the United States and China share an interest in promoting economic prosperity. China is currently the second-largest goods trading partner of the United States, with $598 billion in total trade in 2015. It is also the third-largest export market for the United States, and largest source of imports.

 

Xiaoyi Wang is a research intern at the East-West Center in Washington, D.C. and a graduate student at Georgetown University.