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China Southern to quit SkyTeam, strengthen American partnership

FILE PHOTO: The company logo of China Southern Airlines is displayed at a news conference in Hong Kong, China March 27, 2018. REUTERS/Bobby Yip/File Photo

By Brenda Goh and Jamie Freed

SHANGHAI/SINGAPORE (Reuters) - China Southern Airlines' <600029.SS> <1055.HK> plans to depart the SkyTeam airline alliance, it announced on Thursday, opening the potential for the carrier to become a member of the oneworld group alongside strategic partner American Airlines Group Inc (AAL.O).

American spent $200 million on a minority stake in China Southern last year with an eye to growing in a country where travel is booming, but the benefits of the partnership have been stalled in part by the Chinese carrier's presence in rival alliance SkyTeam.

Oneworld and Skyteam are two of three global airline alliances that provide reciprocal benefits for passengers such as lounge usage and frequent flyer points and give airlines transfer passengers from partners in a boost to revenue. Star Alliance is the third.

China Southern said it will leave SkyTeam on Jan. 1 to develop its own strategy. It said it would strengthen its partnership with American, but did not yet specify any plans to join oneworld.

One source, who spoke on condition of anonymity, told Reuters that China Southern would consider joining oneworld in the future.

Aside from American, members of oneworld include British Airways (ICAG.L), Cathay Pacific <0293.HK>, Qantas Airways (QAN.AX), Japan Airlines <9201.T> and LATAM Airlines (LTM.SN).

"Our members will assess in due course the potential implications for oneworld of China Southern's announcement today that it is to leave SkyTeam," oneworld said in a statement.

Another oneworld member, Qatar Airways has threatened to leave the alliance in recent weeks, alleging American and Qantas were acting against the Middle East airline.

SkyTeam - which includes Delta Air Lines Inc (DAL.N) and Air France KLM SA (AIRF.PA) - has said it will work with China Southern to ensure a seamless transition for all customers and partners - a process that will run throughout 2019 and be completed by the year-end.

SkyTeam already has another big Chinese carrier, China Eastern Airlines Corp Ltd <600115.SS>, as a member. It is unusual to have two rival carriers within the same alliance.

Xiamen Airlines Co Ltd, a subsidiary of China Southern that is also a SkyTeam member, has no plans to quit the alliance, Xiamen spokesman Qiu Dapeng said on Thursday.

(Reporting by Brenda Goh in Shanghai, Jamie Freed in Singapore and Stella Qiu and Yilei Sun in Beijing; Additional reporting by Tracy Rucinski in Chicago; Editing by Himani Sarkar and Frances Kerry)