American Airlines to take 2.68% stake in China Southern

A passenger talks on the phone as American Airlines jets sit parked at their gates at Washington's Ronald Reagan National Airport. (AP)
Updated 29 March 2017
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American Airlines to take 2.68% stake in China Southern

HONG KONG/SHANGHAI: 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 it the second US 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 2006.
“We are 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.
“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.
Cooperation plans
For American Airlines, the deal could widen access to China, one of the biggest sources of tourists to the US, 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 are 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 programs and sharing airport facilities, it said.
Analysts, however, said they expected the deal to have little impact on the airlines’ operations beyond closer cooperation.
“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 do not 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 capitalize on strong growth in outbound Chinese travel that has far outpaced tourism at home.


‘Don’t be too optimistic’: Huawei employees fret at US ban

Updated 26 May 2019
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‘Don’t be too optimistic’: Huawei employees fret at US ban

  • This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei
  • Another critical partner, ARM Holdings, said it was complying with the US restrictions

BEIJING: While Huawei’s founder brushes aside a US ban against his company, the telecom giant’s employees have been less sanguine, confessing fears for their future in online chat rooms.
Huawei CEO Ren Zhengfei declared this week the company has a hoard of microchips and the ability to make its own in order to withstand a potentially crippling US ban on using American components and software in its products.
“If you really want to know what’s going on with us, you can visit our Xinsheng Community,” Ren told Chinese media, alluding to Huawei’s internal forum partially open to viewers outside the company.
But a peek into Xinsheng shows his words have not reassured everyone within the Shenzhen-based company.
“During difficult times, what should we do as individuals?” posted an employee under the handle Xiao Feng on Thursday.
“At home reduce your debts and maintain enough cash,” Xiao Feng wrote.
“Make a plan for your financial assets and don’t be overly optimistic about your remuneration and income.”
This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei as a result of the ban.
Another critical partner, ARM Holdings — a British designer of semiconductors owned by Japanese group Softbank — said it was complying with the US restrictions.
“On its own Huawei can’t resolve this problem, we need to seek support from government policy,” one unnamed employee wrote last week, in a post that received dozens of likes and replies.
The employee outlined a plan for China to block off its smartphone market from all American components much in the same way Beijing fostered its Internet tech giants behind a “Great Firewall” that keeps out Google, Facebook, Twitter and dozens of other foreign companies.
“Our domestic market is big enough, we can use this opportunity to build up domestic suppliers and our ecosystem,” the employee wrote.
For his part, Ren advocated the opposite response in his interview with Chinese media.
“We should not promote populism; populism is detrimental to the country,” he said, noting that his family uses Apple products.
Other employees strategized ways to circumvent the US ban.
One advocated turning to Alibaba’s e-commerce platform Taobao to buy the needed components. Another dangled the prospect of setting up dozens of new companies to make purchases from US suppliers.
Many denounced the US and proposed China ban McDonald’s, Coca-Cola and all-American movies and TV shows.
“First time posting under my real name: we must do our jobs well, advance and retreat with our company,” said an employee named Xu Jin.
The tech ban caps months of US effort to isolate Huawei, whose equipment Washington fears could be used as a Trojan horse by Chinese intelligence services.
Still, last week Trump indicated he was willing to include a fix for Huawei in a trade deal that the two economic giants have struggled to seal and US officials issued a 90-day reprieve on the ban.
In Xinsheng, an employee with the handle Youxin lamented: “I want to advance and retreat alongside the company, but then my boss told me to pack up and go,” followed by two sad-face emoticons.