China Eastern Airlines Corp will combine with Shanghai Airlines Co. after joint losses of 16.5 billion yuan ($2.4 billion) last year prompted the government to bail out the two state-controlled carriers.
“We just got approval from the government” on June 6, Shanghai Airlines Vice President Feng Xin said late on Sunday by phone from Kuala Lumpur.
The combined group would have 306 planes and more than 600 routes, giving it a 50 per cent share of air travel in China’s financial capital. Airlines worldwide may lose $9 billion this year as the recession and swine flu hurt travel demand, the International Air Transport Association forecast today.
“It shows that the government wants to improve the performance of state-owned companies through consolidation,” said Kelvin Lau, an analyst at Daiwa Institute of Research Ltd in Hong Kong. And, “since they have accepted money from the government there is no other choice for them” except to follow the government’s plans. Both carriers halted their shares from trading today, pending announcements. China Eastern is listed in Shanghai and Hong Kong. Shanghai Airlines is only listed in Shanghai.
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