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Shanghai Airlines expects first-half loss

SHANGHAI Airlines expects a loss in the first half of this year due to plunging cargo volume.

"The financial crisis and swine flu virus dampened the aviation market in the first half of this year, especially cargo income, so the company's subsidiary Shanghai Airlines Cargo Intl Co Ltd posted a negative effect on its profit," the carrier said in a preliminary earnings report to the Shanghai Stock Exchange today.

Shanghai Air's net income was 23 million yuan (US$3.37 million) in the first half of last year, or 0.02 yuan per share. The company will release its first-half results later this month.

The country's fifth-largest carrier has special trading limits - a daily trading cap of 5 percent in either direction - after reporting net losses for two straight years. It lost 1.25 billion yuan last year and 435 million yuan in 2007.

The carrier and its local rival China Eastern Airlines, the country's third-largest carrier, have applied to the country's aviation regulator about a merger.

China Eastern plans to take over Shanghai Air in a share swap in which Shanghai Air shareholders will be able to exchange one share for 1.3 shares in China Eastern or exercise their cash options.

Shanghai Air will be delisted from the Shanghai Stock Exchange and all its assets, including planes and routes, will be transferred to China Eastern.

The merger can increase China Eastern's share in the Shanghai air passenger market to 47 percent and air cargo market to 27 percent, which can consolidate its dominant position in the air hub.


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