Quick Take: Budget Carrier Lands Stake in China Southern

One of China’s largest private low-cost carriers, Spring Airlines Co. Ltd., has invested 846 million yuan ($122 million) to buy a stake in state-owned China Southern Airlines.

Spring Airlines subscribed to a total of 141 million shares in China Southern, accounting for 1.63% of share capital, after completion of the latter’s

A share non-public offering, the Shanghai-listed company said in a statement (link in Chinese) on Friday.

The move is partly in response to Beijing’s call for a so-called “mixed-ownership reform” which seeks to attract private capital to revitalize the country’s state-owned assets, the statement said.

Also, Spring Airlines said it was looking for an opportunity to explore a tie-up between the airlines to offer low-budget air services.

The deal follows a similar China Eastern Airlines fundraising program in July when it announced plans to raise as much as $2.2 billion through share issues to investors that included Juneyao Group and its subsidiary, Juneyao Airlines Co. Ltd.

As a result of that deal, Juneyao Group and its airline unit grabbed 5% of the Shanghai-based carrier’s shares.

Guangzhou-based China Southern Airlines is one of the country’s three largest state-run carriers. Its other minor shareholders include the No. 1 U.S. carrier,

American Airlines Group Inc.

China’s air transportation market has been booming in recent years, fueled by growing demand for services from the country’s rising number of middle-class travelers. China is set to surpass the U.S. as the world’s largest aviation market by passenger numbers in 2024, according to the International Air Transport Association.

Spring Airlines, which operates 80 aircraft, said the low-cost aviation sector currently only accounts for around 10% of the total Chinese aviation market and still had big potential for growth.

Contact reporter Mo Yelin (yelinmo@caixin.com)