American Airlines, the world's largest air carrier, may be preparing to invest US$200 million in China Southern Airlines Co.

Fort Worth, Texas-based American is in advanced talks over a deal, according to people familiar with the matter, who asked not to be identified as talks are confidential

An investment in China Southern, which has a market value of about US$10 billion, would allow American to strengthen its presence in a market that the International Air Transport Association predicts will surpass the US to become the world's biggest in terms of passenger numbers by 2024.

Delta Air Lines Inc acquired a minority stake in China Eastern Airlines Corp in 2015.

Under the discussions, American would nominate an observer without voting rights to the Chinese company's board, the people said. Details of a deal are subject to change and a transaction could still fall through.

China Southern representatives couldn't immediately comment when reached after regular business hours. A spokesman for American Airlines declined to comment.

China Southern and its subsidiaries have ordered more than US$15 billion of new aircraft from Boeing Co and Airbus Group SE since 2015 as more people fly in the world's most populous nation.

China Southern and Delta are members of the SkyTeam global airline alliance. American is in the competing Oneworld group, which doesn't have a China-based partner. Such alliances make it easier for passengers to fly around the world by combining schedules through one carrier and allowing travelers to accrue and use frequent-flier miles across airlines. China Eastern also is a SkyTeam member.

Delta didn't immediately return a call seeking comment.

A China Southern stake sale would represent the Chinese government's efforts to diversify ownership of state-controlled enterprises. Authorities have urged firms in industries including power, energy, defense and aviation to take measures this year to broaden ownership.

China Southern, Asia's biggest by passengers, is the last of the nation's top three airlines to bring in a non-mainland Chinese strategic investor. Cathay Pacific Airways Ltd., which is based in Hong Kong, owns about 18 percent of flagship Air China Ltd. Besides Delta, Shanghai-based China Eastern also counts online travel-services provider Ctrip.com International Ltd among its shareholders.