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Talks of injecting cash into airline

SHANGHAI Airlines's shareholders are discussing a cash injection to help the carrier to reduce its debt, a senior official at the company said.

The smaller of two Shanghai's airlines said on Wednesday in a statement that it would suspend trading of its shares from yesterday pending the outcome of the discussions.

"Our shareholders are discussing about a cash injection, and we will issue a statement as soon as possible," said Xu Junmin, the carrier's board secretary, without revealing the amount.

The carrier's biggest shareholder is Shanghai Lianhe Investment Company, which is controlled by the city's state-owned asset regulator.

"The company may reduce its debt ratio by gaining a cash injection from Shanghai Lianhe Investment Company, and the plan may be the beginning of a merger with China Eastern Airlines," said Hu Wenzhou, an analyst at BOC International.

The carrier earlier said its total loss last year would be more than double the 435-million-yuan loss (US$64 million) in 2007 because of fuel hedging costs. As of the end of September, it has a total debt of 13.22 billion yuan, and its debt-to-asset ratio was 91.35 percent.

The market is anticipating a merger between Shanghai Airlines and China Eastern, and Liu Shaoyong, the chairman of China Eastern, on Tuesday said a merger is not a bad idea but the two sides haven't talked about an equity swap.

The parent of Shanghai-based China Eastern has got a 7-billion-yuan cash injection from the central government.


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