All aboard: American Airlines takes $200 mln stake in China Southern

* American Airlines to take 2.68 pct stake in China Southern

* Deal means China's big 3 airlines have foreign


* Airlines may increase cooperation in code-sharing, other


(Updates with American Airlines statement)

HONG KONG/SHANGHAI, March 28 (Reuters) - China Southern

Airlines Co Ltd said on Tuesday it will

sell a small stake to American Airlines Group Inc in a

$200 million deal that will give the carriers better access to

the world's two largest travel markets.

China Southern will issue new shares worth HK$1.55 billion

($199.6 million) to American Airlines, making American the

second U.S. carrier to own part of a Chinese airline after Delta

Air Lines Inc bought 3.55 percent of China Eastern

Airlines Corp for $450 million in 2015.

It also means China's three biggest airlines now have

tie-ups with foreign airlines, something Beijing has encouraged

as a way to boost the sector's global competitiveness. Hong

Kong's Cathay Pacific and Chinese flag carrier Air

China purchased stakes in each other in


"We're pleased to begin this relationship to better connect

two of the world's largest aviation markets and leading

economies," China Southern Chairman Wang Chengshun said in a

statement issued by American Airlines.

In a filing to the Hong Kong stock exchange, China Southern

said it would issue 270.61 million Hong Kong-listed H-shares,

representing 2.68 percent of the enlarged share capital of the

airline. The shares would be issued at HK$5.74 apiece, or a 4.6

percent premium to the previous close.

The carrier's mainland-listed shares, which resumed trading

after a three-day suspension, jumped as much as 4.3 percent in

early trading to their highest price in 7-1/2 months.

Its Hong Kong-listed shares, which opened higher, were down

2.37 percent by 0641 GMT at HK$5.36, lower than the price of the

newly issued shares.

"We are two of the biggest carriers in the world and our

networks are highly complementary," American Airlines President

Robert Isom said in the statement.


For American Airlines, the deal could widen access to China,

one of the biggest sources of tourists to the United States, and

will help it compete with rival Delta, which has invested in

foreign carriers in Mexico, Brazil and Britain in recent years.

It said the two carriers expected to begin codeshare and

interline agreements later this year that would allow customers

to travel to more than 70 destinations beyond Beijing and

Shanghai, and for China Southern's customers to access almost 80

destinations beyond Los Angeles, San Francisco and New York.

Guangzhou-based China Southern, the country's biggest

airline in terms of passenger numbers, said the deal would help

it "achieve the strategic goal of building a world-class

aviation industry group".

The airlines also could increase cooperation in other areas

including staffing, sales, passenger loyalty programmes and

sharing airport facilities, it said.

Analysts, however, said they expected the deal to have

little impact on the airlines' operations beyond closer


"It makes sense to partner with another foreign airline,"

said Daiwa Capital Markets analyst Kelvin Lau, citing Air China

and China Eastern's deals.

"But ... because the stakeholding is pretty small, I don't

think it will make any material changes in terms of management."

Beijing has vowed to shake up Chinese airlines by

implementing mixed-ownership reforms and introducing private

capital and strategic investment into its state-owned

enterprises to improve efficiency and competitiveness.

Chinese airlines have been aggressively expanding their

fleet and international routes as they seek to capitalise on

strong growth in outbound Chinese travel that has far outpaced

tourism at home.

($1 = 7.7676 Hong Kong dollars)

(Reporting by Donny Kwok in HONG KONG, John Ruwitch and Brenda

Goh in SHANGHAI; Editing by Stephen Coates)