Shares jump on reports of airline merge

By Winny Wang  |   2008-7-24  |     NEWSPAPER EDITION

SHARES of two Shanghai-based airlines rallied yesterday on speculation that the government may merge the two companies.

Local media reported that the State-owned Assets Supervision and Administration Commission, which controls China Eastern Airlines, and Shanghai state-owned assets regulator, which controls Shanghai Airlines, are discussing merging and restructuring the two carriers.

But board secretaries of the two carriers said yesterday they hadn't received notice about the issue so far.

China Eastern jumped 4.16 percent to 7.77 yuan (US$1.14) per share in Shanghai yesterday and Shanghai Airlines gained 4.13 percent to 6.56 yuan, while the Shanghai Composite Index lost 0.29 percent to 2,837.85 points.

Caijing Magazine yesterday cited an unidentified industry source as saying that the cooperation may be a part of local government's efforts to develop the city into a global financial center.

It said the discussion remained among government departments and had not yet involved the carriers.

The tie-up would consolidate the two carriers' domination of the local aviation market with China Eastern's 40-percent share and Shanghai Airlines' 15-percent share.

However, China Eastern may face a more complicated situation as it remains in cooperation with Singapore Airlines.

China Eastern's minority shareholders in January vetoed the sale of a 24-percent stake to the Singaporean carrier and its parent Temasek Holdings Pten for HK$3.8 (US$0.48) per share in anticipation of a higher offer from Air China.

China Eastern later rejected Air China's offer of HK$5 a share.

China Eastern said it would not consider a restructure until after the Olympic Games.