Qatar buys 5% of China Southern in challenge to American Airlines

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Qatar Airways purchase of 5% of one of the worlds fastest growing and potentially largest airline, made more than a few aviation industry people smile. Except possibly at American and Delta Airlines.

China Southern exited the Skyteam Alliance on January 1st, much to the chagrin of Delta and its other members. China Southern had been part of a complex set of transactions with Delta, AF-KLM and Virgin Atlantic that still haven’t fully completed, seeing Delta take effective proxy control of the UK airline.

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Qatar and China Southern CEO’s

Meanwhile American Airlines purchased a 2.68% share in China Southern, by far the largest airline in China. The American-China Southern agreement also came with a sharp increase in code sharing between the two – something that Qatar has also managed to acquire.

Qatar you may recall, is in a bitter dispute with the US airlines, especially American, which is a Oneworld partner, supposedly. Qatar considers American so hostile to its Oneworld membership – along with Qantas and Cathay Pacific, that it’s even suggested it might leave.

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The whole thing has been further aggravated by Air Italy, which Qatar owns 49% of, and which the US Big 3, which of course includes American, says is just a Qatari subsidised way of them getting round the ‘limits’ that don’t actually exist, ‘agreed’ with the US Administration in May 2018. As I reported here at the time, the whole thing was worthless sham of a document that said a great deal but did nothing.

Qatar’s purchasing of share holding in airlines linked directly to American seems like some sort of strategy to encircle it with so many influence points, it will have no choice but to become co-operative.

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It used this methodology to quiet opposition from Cathay Pacific, buying a 9.9% share holding in the company, from that point on Cathay stopped complaining.

Meanwhile Oneworld CEO Rob Gurney has said informal talks with China Southern have taken place, but nothing concrete has emerged.

Qatar Airways power in the airline industry grows with every purchase. It owns 20% of IAG (BA, Iberia, Vueling, Level, Aer Lingus), 10% of LATAM, and in turn has shareholder influence over Air China via its assets in Cathay Pacific, and Norwegian via its asset in IAG, On top of that its a major shareholder in London Heathrow.

Qatar frightened the daylights out of American a couple of years ago when it announced it was about to buy up to 10% of American shares on the stock market. American made it plain that this would be seen as hostile and unwelcome and at the time Qatar backed off. I’m not so sure it would do so again.

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