China Southern shares up after Qatar Airways buys 5% stake

Beijing

CHINA Southern Airlines Co shares advanced after Qatar Airways purchased 5 per cent of the mainland carrier and expressed interest in buying more in a bid to bolster its network in China.

The Gulf carrier now holds a total of 613.36 million shares of China Southern, including 430 million shares listed in Shanghai and 183 million in Hong Kong, according to a filing by the state-owned mainland airline Wednesday.

China Southern shares rose as much as 4 per cent in Shanghai on Thursday, the biggest intraday gain in a month. The Hong Kong-traded stock advanced as much as 1.9 per cent. The investment makes Qatar Airways the fourth-biggest shareholder of China Southern and is in line with the Doha-based company's strategy of global deals.

Qatar Airways owns 20 per cent of British Airways owner IAG SA, 10 per cent of South American carrier Latam Airlines Group SA and close to 10 per cent of Cathay Pacific Airways Ltd.

Guangzhou-based China Southern, which recently quit the SkyTeam alliance, has been seeking closer ties with members of the rival Oneworld alliance. In 2017, American Airlines Group Inc bought a little less than 3 per cent of Asia's largest carrier by fleet size for US$200 million. China Southern is also in talks to form a joint venture with British Airways and enter a code-sharing deal with Finnair Oyj, all of which are Oneworld members.

"As China's largest carrier, China Southern could be an ideal partner for Oneworld members to enhance their services to/from China," Morgan Stanley analysts led by Edward Xu wrote in a note on Wednesday. Qatar Airways may seek to increase its stake further in the next 12 months, according to the filing by China Southern.

The Chinese carrier's top three shareholders are China Southern Air Holding Ltd, HKSCC (Nominees) Ltd and Nan Lung Holding Ltd. BLOOMBERG