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China eastern acquires Shanghai Air

2010-02-09 08:28 BJT

Shanghai Airlines has merged into China Eastern Airlines. The 8.9 billion yuan, or 1.3 billion US dollar deal, is expected to create a carrier with more than half of the market share in Shanghai, China's financial hub.

Before the merger, China Eastern and Shanghai airlines were close rivals, competing for air travellers in Shanghai. However, neither company emerged victorious. In the first quarter of 2009, both reported huge losses.

To break the deadlock, China Eastern unveiled its merger plan in July, 2009. The airline company would swap 1.3 of its Shanghai-listed A shares for every share from Shanghai Airlines. Shareholders from both companies voted in favor of the plan.

After the deal, Shanghai Airlines became a wholly-owned subsidiary of China Eastern Airlines but still retained its brand. The new company's market share surged to 46 percent in Shanghai.

Liu Jiangbo, Deputy GM of China Eastern Airlines Group, said, "In the past, the two companies had to purchase their own sets of equipment and employ their own teams. It was a big waste. Now we can save 100 million yuan on plane maintenance. Net profit will increase by at least 1.5 billion yuan. We've done what once would have been inconceivable."

For passengers in Shanghai, it has become more convenient.

Staff member of China Eastern Airlines, said, "If a passenger misses a China Eastern flight, they can board the Shanghai Airlines plane which takes off half an hour later."

For China Eastern, it is just the beginning. The new airline company now has 331 aircraft in its fleet, second only to China Southern Airlines.

In the world of aviation, size does matter. The merger has given China Eastern enough confidence to increase its presence in Northern China. New flights are being scheduled to boost market share in Beijing, a city traditionally dominated by Air China and China Southern Airlines.

Editor: Liu Anqi | Source: CCTV.com