It appears certain that Singapore Airlines will buy a certain
stake in the money-loosing China Eastern Airlines as both companies
have said they will soon make a major announcement.
The two companies halted trading of their shares on Tuesday and
insiders say an announcement could come as early as Friday.
"We are waiting for word from the headquarters," said Wang Yong,
manager of Public Relations Department of Singapore Airlines' China
office when asked about the potential deal.
For China Eastern, the deal would provide a major cash injection
and help improve the quality of its assets. China Eastern Airlines
lost 510.86 million yuan in the first quarter of 2007, down from
955.1 million yuan in losses for the same period last year,
according to its unaudited quarterly report.
Singapore Airlines would also bring to China Eastern managerial
expertise and in return get access to China's rapidly growing
mainland aviation market.
Li Fenghua, chairman of China Eastern, said earlier that
Singapore Airlines would not get more than 25 percent of his
company, which is the maximum allowed by Chinese law.
Li was also quoted earlier as saying the deal needed policy
support from the government. The agreement does require approval
from regulators.
Goldman Sachs calculates that 25 percent of China Eastern is
worth about one billion U.S. dollars based on its share price on
the Hong Kong exchange on Monday of 3.73 Hong Kong dollars
(US$0.47).
China Eastern's A-share price has nearly tripled since February.
It settled at 9.60 yuan before trading was suspended on the
Shanghai market on Tuesday.
Li Lei, analyst of China Securities Co., Ltd., says Singapore
Airlines is likely to buy the relatively lower-priced Hong Kong
shares.
(Xinhua News Agency May 24, 2007)