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 6000115.SS 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 2006.

“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.

SOURCE REUTERS, Read more..