China Eastern Chairman Li Fenghua reiterated that the company
will not merge or restructure with Air China under any
circumstances, after a sales proposal to sell stakes to Singapore
Airlines was rejected by 77.6 percent shareholders on Tuesday.
"China Eastern and Air China are at the same level in terms of
operation, management and market performance, so we will not
consider introducing Air China as our strategic partner no matter
how high the price they can offer," said Li at a press briefing
after the shareholders meeting.
Around 77.6 percent of China Eastern's shareholders on Tuesday
rejected a proposed sale of 24 percent stake to Singapore Airlines
and Lentor investment Pte Ltd, a wholly owned subsidiary of
Temasek.
Many shareholders have expressed their objections in the
three-hour shareholders meeting held in Shanghai Hangyou Hotel,
near China Eastern's headquarters.
An attendee surnamed Ji who represents minor shareholders
holding 600,000 H shares of China Eastern, said that Singapore
Airlines' offer price is too low and unfair to minor
shareholders.
Yang Peng from Rongtong Fund Management Co Ltd, the third
largest shareholder of China Eastern's circulating shares, also
voted down the deal and said that China Eastern can consider the
proposal of Air China, who offer a higher price.
Singapore Airlines (SIA) said in a statement yesterday it was
"disappointed" after China Eastern shareholders rejected the deal,
but it "will continue to support the building of a relationship
with China Eastern, noting that the airlines are still mutually
willing to develop the relationship."
China Eastern signed an agreement to sell a combined 24 percent
stake to Singapore Airlines and Temasek at HK$3.8 on September 2.
But CNAC, the parent company of Air China, which owns 12.07 percent
stake in China Eastern, said on Sunday that it can make a higher
offer of 5 HK dollars per share.
CNAC said on Tuesday that it plans to submit a formal offer to
China Eastern within two weeks after shareholders rejected the
Singaporean deal.
China Eastern's chairman Li Fenghua said the voting result is
within his expectation because a vast number of shareholders that
previously supported the deal have changed their ideas after CNAC
made the offer.
"We will further study the possibilities for the alliance with
Singapore Airlines and also consider shareholders' suggestions,"
said Li.
Li said that the price is not a major obstacle. "If Singapore
Airlines raise the price, Air China may follow suit to offer a much
higher price, which is not an effective way to solve the current
problem," said Li, adding that China Eastern will mull over further
plan to act against the CNAC bid, but declined to elaborate.
Analysts said that the result is within their expectation
because of Air China's higher offering prices. Air China aims to
gain a leading position in Shanghai, which is expected to build
into an international aviation hub, analysts said.
China Eastern accounts for 35 percent of aviation market in
Shanghai, followed by 18 percent of Shanghai Airlines and 12
percent of Air China.
"Air China's market share is expected to soar to 50 percent if
it succeeds in the possible merger with China Eastern," said Zheng
Qingping, an analyst at Tebon Securities.
"All airline companies are striving to gain more market share in
Shanghai, with the increasing importance of the city in the
international aviation market," said Zheng.
(China Daily January 9, 2008)
