American Airlines (AA, Dallas/Fort Worth) is set to acquire a 2.68% stake in China Southern Airlines (CZ, Guangzhou) for a gross consideration of HKD1.55328 billion Hong Kong dollars (USD199.962 million) the Chinese carrier has announced.

In a filing to the Shanghai Stock Exchange (SSE) on Tuesday, March 28, China Southern said the US carrier had agreed to subscribe to 270,606,272 Subscription Shares valued at HKD5.74 (USD0.74) per Share. In return, American will be allowed to appoint a Board Observer i.e. one who is allowed to attend all meetings of the Board, whether in-person or by telephone or video-conference, but who is not entitled to vote as a director.

Proceeds from the sale will be used to supplement the general working capital of the China Southern Group.

The carrier said that as a result of the purchase, it may also seek to increase cooperation with American Airlines in the fields of codesharing, a transport sharing agreement, staff/experience sharing, sales, passenger loyalty programs, and airport facilities sharing among other aspects.

"The Subscription and strategic cooperation with the Subscriber will help the Company to improve its corporate governance, further strengthen the management and enhance its internationalization, increase its competitiveness and influence in the global aviation market, and lay a solid foundation for the Company to achieve the strategic goal of building a world-class aviation industry group," the filing said.

Closure of the transaction is dependent on internal as well as regulatory approvals.