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China Eastern merger plan may be released next week

By Zhang Jiawei (chinadaily.com.cn)
Updated: 2009-07-10 12:57

The details of a restructuring plan between China Eastern Airlines and Shanghai Airlines are likely to be announced next week, according to Liu Shaoyong, chairman of China Eastern.

The Shanghai Securities News reported today trading of both companies' stocks, which was suspended on June 8, is likely to resume on July 13.

The most likely plan is that Shanghai Airlines will merge into China Eastern through a share swap, the report said. China Eastern will swap 1.3 of its Shanghai-listed A shares for each Shanghai Airlines A share. A cash option is also available for Shanghai Airlines' shareholders, the newspaper said.

China Eastern may issue additional shares to its parent company – China Eastern Air Holding Co – and on the secondary market to lower its debt-to-equity ratio, according to the report.

"The restructuring process is going well," Liu said. "Some internal and external procedures are yet to be finished."

Related readings:  Airline merger talk confirmed  China Eastern, Shanghai Air set up revamp team  China Eastern wants to gain more market share in Beijing  China Eastern reports steep full-year net loss

Last month, Liu said at the China Eastern shareholders' meeting that the restructuring plan would be publicized within 20 days.

"China Eastern is embracing a new life from previous difficulties," Liu said. The carrier significantly narrowed its losses in the first half of the year and its balance sheet was gradually improving, Liu explained. But he declined to give specific figures about the airline's most recent operations.

The takeover of Shanghai Airlines helps China Eastern raise its market share in Shanghai to more than 50 percent, but Liu doesn't stop here. The airline now moves to enhance its position in the Beijing market.

The company announced yesterday that its Beijing branch officially started to take control of planes from July and is expected to own a fleet of 9 planes, mostly Airbus A330s, by the end of 2009, which will increase its total transport capacity in Beijing to nearly 30 planes, the newspaper said.

The airline is expected to spend more than 15 billion yuan ($2.2 billion) on deployment of more than 50 planes in the Beijing market in the next three years, according to the report.

Liu said China Eastern has about 13 percent market share in Beijing and Shanghai Airlines has 5 percent. The carrier plans to increase its Beijing market share to 20 percent in the coming five years, he said.