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Merger plan: Shanghai Air to keep brand

SHANGHAI Airlines will become a subsidiary of China Eastern Airlines but remain an independent entity with its own brand, the carrier's chairman, Zhou Chi, said today.

The two Shanghai-based carriers are still discussing details of a merger plan, which may be released a month after their suspension of shares, Zhou said at a shareholders' meeting.

The two loss-making carriers were suspended from trading on June 8 as they began merger talks. A merger is expected to bring them more than a 50-percent market share in Shanghai – the country's air travel hub.

Zhou said they have basically agreed that China Eastern will own a controlling stake in Shanghai Air, and the latter can remain an independent entity and brand.

It may require four to five months to complete the merger after details of the plan are revealed, Zhou added.

"The two carriers won't have big changes in their business in the short term under such a cooperation plan and they will still run businesses independently," said Li Lei, an analyst at China Securities Co.

"This plan is right for China Eastern at this moment as the carrier still faces big operation pressures and may have no energy to manage Shanghai Air," Li said.

China Eastern lost about 14 billion yuan (US$2.05 billion) last year due to the waning demand brought on by the financial crisis and fuel hedging losses, while Shanghai Air also suffered a loss of 1.25 billion yuan in the period.

Zhou said they had not determined whether Shanghai Air would be delisted from the Shanghai Stock Exchange, and they haven't discussed with companies which were said to have interest in a back-door listing via its shell, including Bank of Shanghai and Guotai Junan Securities.


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