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Shanghai Air to keep brand
By Winny Wang |
July 1, 2009, Wednesday
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Print Edition
Print Edition
SHANGHAI Airlines will become a subsidiary of China Eastern Airlines but remain an independent entity and keep its brand, Shanghai Airlines Chairman Zhou Chi said yesterday.
The two Shanghai-based carriers are still discussing a merger plan, whose details may be released a month after their shares were suspended from trading, Zhou said at a shareholders' meeting.
The shares of the two loss-making airlines were suspended from trading on June 8 as they began talks about a merger, which is expected to secure them a more than 50-percent market share in Shanghai.
Zhou said the two airlines have basically agreed that China Eastern will own a controlling stake in the smaller Shanghai Airlines which will remain an independent entity and brand.
The merger may take four to five months to complete after details of the plan are made public, Zhou added.
"The two carriers won't have big changes in business in the short term under a cooperation plan, and they will still operate independently," said Li Lei, an analyst at China Securities Co. "This plan is proper for China Eastern at this moment as the carrier still faces huge operational pressures and may have no energy to manage Shanghai Airlines."
China Eastern lost about 14 billion yuan (US$2.05 billion) last year on sluggish demand brought by the global financial crisis and fuel hedging losses, while Shanghai Airlines also lost 1.25 billion yuan in the period.
Zhou said they haven't decided if Shanghai Airlines will be delisted from the Shanghai Stock Exchange, and they haven't discussed with companies which were said to be keen in a back-door listing via its shell, including the Bank of Shanghai and Guotai Jun'an Securities.
Speculation about the merger of the two state-run carriers have been circulating for months, which intensified after the parent of China Eastern secured a 7-billion-yuan cash injection from the central government, and Shanghai Airlines got a 1-billion-yuan financial aid from its shareholder.
The two Shanghai-based carriers are still discussing a merger plan, whose details may be released a month after their shares were suspended from trading, Zhou said at a shareholders' meeting.
The shares of the two loss-making airlines were suspended from trading on June 8 as they began talks about a merger, which is expected to secure them a more than 50-percent market share in Shanghai.
Zhou said the two airlines have basically agreed that China Eastern will own a controlling stake in the smaller Shanghai Airlines which will remain an independent entity and brand.
The merger may take four to five months to complete after details of the plan are made public, Zhou added.
"The two carriers won't have big changes in business in the short term under a cooperation plan, and they will still operate independently," said Li Lei, an analyst at China Securities Co. "This plan is proper for China Eastern at this moment as the carrier still faces huge operational pressures and may have no energy to manage Shanghai Airlines."
China Eastern lost about 14 billion yuan (US$2.05 billion) last year on sluggish demand brought by the global financial crisis and fuel hedging losses, while Shanghai Airlines also lost 1.25 billion yuan in the period.
Zhou said they haven't decided if Shanghai Airlines will be delisted from the Shanghai Stock Exchange, and they haven't discussed with companies which were said to be keen in a back-door listing via its shell, including the Bank of Shanghai and Guotai Jun'an Securities.
Speculation about the merger of the two state-run carriers have been circulating for months, which intensified after the parent of China Eastern secured a 7-billion-yuan cash injection from the central government, and Shanghai Airlines got a 1-billion-yuan financial aid from its shareholder.
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