UPDATE 2-China Southern Airlines to quit SkyTeam alliance next year

* Transition process will run throughout 2019 - SkyTeam

* Subsidiary Xiamen Airlines to remain in SkyTeam

* Oneworld member American Airlines owns China Southern stake

* China Southern will consider joining oneworld in future - source (Adds potential oneworld plans, Cathay Pacific veto power)

SHANGHAI/SINGAPORE, Nov 15 (Reuters) - China Southern Airlines said it will leave the SkyTeam airline alliance on Jan. 1 next year to meet the needs of the company's own development strategy.

SkyTeam is one of the world's three major airline alliances and had two big Chinese carriers, China Southern and rival China Eastern Airlines Corp Ltd, as members, which is unusual given they operate in the same market.

The three alliances, which also include Star Alliance and oneworld, provide recriprocal benefits for passengers such as lounge usage and frequent flyer points and give airlines transfer passengers from partners in a boost to revenue.

China Southern, the country's largest airline by passenger numbers, is leaving SkyTeam because it believes it is expensive relative to the benefits of membership, a source at the airline told Reuters on condition of anonymity.

It will consider joining oneworld but has not yet made a decision and would not do so immediately, the source added.

Cathay Pacific, as a founding member of the oneworld alliance, however, has the right to veto other entrants from the greater China region, said two sources familiar with the situation, who were not authorized to speak to media.

China Southern's Guangzhou hub competes against Cathay Pacific for international traffic.

Cathay Pacific and oneworld did not immediately respond to Reuters emails. China Southern also did not respond to Reuters' requests for a comment on future alliance plans.

However, in a statement to the Shanghai stock exchange, China Southern said it did not expect its decision to not renew its SkyTeam membership to significantly impact its operations.

SkyTeam has said it will work with China Southern to ensure a seamless transition for all customers and partners - a process that will run throughout 2019 and be completed by the year-end.

Xiamen Airlines Co Ltd, a subsidiary of China Southern that is also a SkyTeam member, however, has no plans to quit the alliance, Xiamen spokesman Qiu Dapeng said on Thursday.

Among the other members of SkyTeam are Delta Air Lines Inc and Air France KLM SA. Both have close partnerships with China Eastern.

Oneworld member American Airlines Group Inc last year spent $200 million buying a stake in China Southern, a partnership the latter on Thursday said it would strengthen. (Reporting by Brenda Goh in Shanghai, Jamie Freed in Singapore

and Stella Qiu and Yilei Sun in Beijing Editing by Himani

Sarkar)