Singapore Airlines Ltd and parent Temasek Holdings Pte may pay
about US$930 million for a stake in China Eastern Airlines Corp to
expand the carrier's reach in China, according to sources.
Singapore Airlines would invest about US$600 million and Temasek
about US$330 million for a combined stake of about 24 percent, said
the sources who did not want to be identified before the terms of
the deal are finalized and approved by the regulators.
A man watches a China
Eastern plane taxi at Shanghai's Hongqiao Airport. Singapore
Airlines Ltd and parent Temasek Holdings Pte may pay about $930
million for a stake in China Eastern.
The deal would give Singapore Airlines, Asia's most profitable
carrier, more access to a market forecast to grow fivefold by 2025.
And China Eastern, the mainland's only listed carrier to make a
loss last year, may reduce debt and gain a partner to help fend off
competition from Cathay Pacific Airways Ltd and Air China Ltd in
Shanghai, its home market.
"China Eastern is potentially a goldmine for Singapore
Airlines," said Greg Kuhnert, who manages about US$1 billion in
Asian equities, including Singapore Airlines shares, at Investec
Asset Management in London. "The Chinese airline industry has one
of the highest growth rates worldwide."
Chinese carriers flew 160 million passengers last year, 15
percent more than a year earlier, according to the General
Administration of Civil Aviation. China's economy has grown at
least 10 percent in each of the past four years, making travel
affordable to more people.
China Eastern has a market value of US$4.89 billion, meaning a
24 percent stake would be valued at about US$1.17 billion.
A deal may be announced this week, according to the sources,
ending at least 10 months of talks.
Singapore Airlines spokesman Stephen Forshaw, Temasek
spokeswoman Lim Siow Joo and China Eastern board secretary Luo
Zhuping all declined to comment.
A deal would help Singapore Airlines, which made a record
US$2.12 billion (US$1.4 billion) profit last fiscal year, build on
its 104 flights a week to Chinese cities. It would also complement
the carrier's cargo operations.
"The air cargo side of the business offers significant
opportunities," Kuhnert said.
China Eastern's loss widened to 3.31 billion yuan in 2006 from
467 million yuan a year earlier. The carrier has 205 planes and
35,000 employees.
A stake in China Eastern may help Singapore Airlines compete
with Cathay Pacific in the North Asian market.
(China Daily May 30, 2007)
