Airlines a step closer to merger

By Winny Wang | June 25, 2009, Thursday |

Print Edition

CHINA Eastern Airlines has won regulatory approval to raise 7 billion yuan (US$1.02 billion) through share placement, a move seen as a step closer to a merger with Shanghai Airlines.

The Shanghai-based carrier will issue 1.44 billion Shanghai-listed A shares at 3.87 yuan apiece and the same amount of Hong Kong-listed H shares to its state-run parent, China Eastern Air Holding Co, which will bring it 7 billion yuan in cash, according to a statement filed to the Shanghai Stock Exchange yesterday.

The cash injection will help cut the carrier's debt-to-asset ratio to 90.1 percent from 98.5 percent.

China Eastern, the country's third-largest carrier, is in talks with its smaller rival Shanghai Airlines about a merger.

China's state-owned asset regulator and the Shanghai government have granted preliminary approval for China Eastern Airlines and Shanghai Airlines to merge and details of the merger is due to be unveiled within 20 days from June 13.

A working team consisting of four China Eastern officials, including Chairman Liu Shaoyong and General Manager Ma Xulun, and three executives from Shanghai Airlines, including Chairman Zhou Chi, has met to discuss ways to cooperate toward a merger.

There is much anticipation in the market that the two airlines may cooperate through a share swap or making the smaller carrier a subsidiary of China Eastern.

Shanghai Airlines has also secured a 1-billion-yuan cash injection from shareholder Jinjiang International Holdings Co. The cash injections into the two carriers were seen as prelude for their merger.

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Airlines a step closer to merger

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