Cross-alliance partnerships between airlines are not unusual, and over the past couple of days, two cross-alliance pairs have announced deeper cooperation.

The first is Lufthansa and Cathay Pacific, representing Star Alliance and Oneworld, respectively. The second is American Airlines and China Southern. These two pairings involve Cathay and China Southern, whose headquarters are quite close, and the impact on Chinese air travelers should not be ignored.

Lufthansa Group and Cathay Pacific

Cathay has long been known for its excellent service, but it has had some recent issues. On its Hong Kong–Europe routes, Cathay has long been stuck in place, adding one route and cutting one route. The Lufthansa Group (including Lufthansa, Swiss International Air Lines, and Austrian Airlines), meanwhile, has had difficulty entering the far-eastern Australia/New Zealand market due to geography. In mainland China, Lufthansa also lacks enough reach to operate in a sufficient number of smaller city airports.

The cooperation between these two carriers also includes a code-share agreement: from the Lufthansa Group’s major European hubs (Frankfurt FRA, Munich MUC, Zurich ZRH, and Vienna VIE), passengers can take Lufthansa Group flights via Hong Kong International Airport and connect to Cathay or Cathay Dragon flights to mainland China, other Asian cities, Australia, and New Zealand. This should create more competition against Singapore Airlines, which has long controlled the so-called Kangaroo Route. Also, passengers departing from Hong Kong can take Cathay or Cathay Dragon flights and connect through mainland China to Europe.

Frequent-flyer cooperation is the part everyone is watching most. The agreement says Lufthansa Group’s frequent-flyer program Miles & More will work with Cathay Pacific’s Asia Miles. This does not mean the two mileage programs will be fully redeemable with each other; it is more likely limited to mileage earning across mutually cooperative routes, which may not be very meaningful by itself. Elite tier recognition between the two may also be possible on those routes (including priority boarding benefits).

American Airlines buys China Southern stock

American Airlines (AA) is also making a bold move, investing $200 million to take a stake in SkyTeam member China Southern, accounting for 2.76% of China Southern.

China Southern will issue a corresponding amount of new shares for this.

China Southern said the details of the cooperation are not fully finalized, but they are likely to include code-sharing, frequent-flyer cooperation, and airport ground services. The transaction is still subject to regulatory approval.

AA’s recently proposed Los Angeles–Beijing route faced major resistance and likely does not fully satisfy Chinese passenger demand. The code-share could include many China Southern domestic routes originating from Beijing and a smaller number from Shanghai, allowing AA to connect passengers onward from smaller mainland cities to the United States. Because AA does not operate to Guangzhou, it cannot fully take advantage of China Southern’s domestic network. AA is also likely to attach CZ flight numbers to certain AA flights out of Los Angeles that carry many Chinese passengers. Passengers can transfer via Guangzhou on a China Southern A380 and then connect directly to AA domestic flights.

Because AA’s stake in China Southern is less than 3%, frequent-flyer cooperation may not be as extensive as the Cathay-Air China setup. The most likely outcome is still mileage earning and redemption on jointly operated code-share routes, meaning AA miles can eventually be used for direct redemptions to smaller domestic cities. Something to watch.

Rumors?

There are also rumors that Cathay’s ties with Star Alliance carriers are unusually close, possibly with an eye toward eventually moving alliances. Cathay and Air China have cross-shareholdings, and last year they entered code-share and frequent-flyer cooperation with Air Canada, then moved on to cooperation with Lufthansa Group of Star Alliance. Whether this is purely to improve passenger service options or a trial phase before a broader alliance shift, we do not know.

For a bit more speculation: the AA-China Southern deal could also be because AA spotted Cathay’s ambitions and bought a kind of strategic “insurance” in mainland China, leaving room in case China Southern is later brought into Oneworld (purely speculation—take it with a grain of salt, and don’t take it as fact). Once the details of the airline partnership are made public, we can revisit how this may impact mileage earning and redemption.