China Southern and American implement frequent flyer benefits

March 22nd 2019

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American is China Southern’s first non-SkyTeam partner. Read More »

China Southern and American Airlines (AA) are expanding their partnership with reciprocal frequent flyer earning and redemption. AA is China Southern’s first loyalty link outside of SkyTeam, excluding a partnership with Sichuan Airlines, which China Southern has equity in.

China Southern has announced recent commercial partnerships with British Airways, Emirates, Finnair and Qatar Airways but these so far exclude loyalty benefits.

This initial AA loyalty partnership covers earning and burning and does not yet include recognition and lounge access. AA earning on China Southern is only for base miles and not elite qualifying unless booked as an AA codeshare.

Earning rates (see chart) have similarities with AA's other trans-Pacific partners, Cathay Pacific and Japan Airlines (JAL). Notable differences are a higher cabin bonus for full-fare business class and no bonus for discount business class. China Southern has more earnable economy fares than Cathay while economy rates are higher are on JAL.

China Southern earning on AA will qualify for elite miles irrespective of marketing code. The stakes are higher for China Southern, which exited SkyTeam and since then has been independent of any global alliance. Loyalty links with a geographical range of airlines will improve the airline’s position.

China Southern would likely make notable trans-Pacific gains in volume and yield if AA made China Southern an elite qualifying partner. That would further incentivise AA's customer base to book China Southern. Yet this could negatively impact the US carrier's own China performance, which is smaller and still developing.

Korean Air observed a decline in trans-Pacific performance when Delta rescinded elite earning on Korean Air. This was a heavy-handed tactic that succeeded in convincing Korean Air to establish a JV with Delta.

There is no guidance on China Southern’s affiliation with SkyTeam members post its exit. Perhaps most to be watched are Delta and China Eastern, as well as Air France-KLM and Korean Air since those airlines have deeper relationships with each other centred around Delta. China Southern’s decision to leave SkyTeam was heavily influenced by Delta’s investment in China Eastern and then the Delta-China Eastern-AFKLM partnerships that excluded China Southern. China Southern was SkyTeam’s first Chinese member and is Asia’s largest airline.

AA invested US$200 million for an approximately 2.7% stake in China Southern. The two codeshare on Mainland China-US flights as well as in each other’s domestic markets. The loyalty benefits took longer to work through but are within the previous guidance of early 2019. They became effective on the same day of the announcement, 20 March.

China Southern’s growing ties to other airlines, mostly in oneworld, will likely further draw interest in China Southern joining oneworld. Yet this is a more complex and profound matter than it may seem due to the existing membership of co-founder Cathay Pacific. China Southern’s deeper ties and likely future JVs may show itself and partners that alliance benefits can be achieved without alliance membership and costs.

Comparison of American Airlines trans-Pacific earning partners

Source: Orient Aviation