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February 9, 2010

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China Eastern seeks investor

CHINA Eastern Airlines is taking steps to improve its performance, such as seeking strategic investors and widening its flight network, to help build Shanghai into an international air hub after finalizing its takeover of Shanghai Airlines.

Shanghai-based China Eastern yesterday announced the formation of a bigger carrier with operating capital of more than 150 billion yuan (US$21.96 billion), a fleet of 331 aircraft and more than 600 routes that link 151 destinations by taking over its smaller local rival via a share swap.

"The city needs a leading airline that owns more than 50 percent of its market share to help build it into an international air hub, and the merger is a key step," Shanghai Vice Mayor Ai Baojun said at a ceremony to celebrate the merger yesterday.

The takeover will increase China Eastern's market share in Shanghai to more than 50 percent from the previous 32 percent. The two carriers have begun widespread cooperation such as rearranging capacity and routes.

"A key task after the merger is to build the Pudong International Airport into an international air hub, and we will cooperate with airport authorities to reduce transit time by 20 minutes," said Ma Xunlun, general manager of China Eastern.

Ma said China Eastern is open to strategic investors to improve management and widen financing channels, but it was still too early to announce candidates.

Singapore Airlines, which had intended to buy a stake in China Eastern but was blocked by Air China, was back in the picture amid speculation that it will re-launch cooperation with the new China Eastern.

Ma also noted that the carrier is making efforts to stop receiving special treatment on its yuan-denominated shares from the Shanghai bourse by better performance this year.

China Eastern received special treatment, a daily trading cap of 5 percent in either direction, after reporting two straight years of losses. It must secure a profitable main business to get rid of this.


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