China Eastern Airlines to Finish Acquisition of Peer in 09

China Eastern Airlines Co., Ltd. (SEHK: 0670; SHSE: 600115), one of the country's three largest airways, is expected to complete the acquisition of Shanghai Airlines Co., Ltd. (SHSE: 600591) within 2009.

At the forth temporary shareholders' meeting of 2009, more than 99.6 percent shareholders voted yes to the acquisition scheme. Both sides are waiting for the approval of the China Securities Regulatory Commission (CSRC) now.

The China Eastern Airlines Chairman disclosed that the acquisition passed the anti-trust investigations by the Ministry of Commerce, and that both the General Administration of Civil Aviation of China (CAAC) and the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) gave their permission to the scheme.

Notably, Eastern Airlines turned to black in the first half of 2009 with a profit of CNY 1.174 billion, thanks to the state subsidies and reduction of its losses from fuel hedging on the changes in fair value. However, Shanghai Airlines incurred a loss of CNY 91.29 million.

From January to June, the domestic aviation demand was weak. Consequently, Eastern Airlines and Shanghai Airlines separately lost CNY 20.976 million and CNY 545 million from their core businesses.

The former reaped operating revenue of CNY 17.498 billion, falling 15.83 percent from a year earlier amid the global financial crisis, and the latter got CNY 5.438 billion with a decline of 22.52 percent.

Notably, Eastern Airlines, headquartered in Shanghai, east China, inched up 3.54 percent year on year in total operating revenue on its domestic routes, while that from its international operations stepped down.

In contrast, its smaller peer based in the same city dropped 9.38 and 45.5 year on year separately in operating revenue from its domestic and overseas airlines.

In June, Eastern Airlines obtained government investment of CNY 7 billion. On August 24, the airway announced that it planned to issue 1.35 billion A shares at most to not more than 10 appointed investors.

Its controlling shareholder China Eastern Air Holding Co. planned to subscribe for 490 million shares at most for about CNY 6.413 billion in cash, said earlier reports. The controlling shareholder is reported to afford the deal with money from the government.

In September, Eastern Airlines held the third temporary shareholders' meeting of this year, as well as the meetings of separately A share holders and H share holders. It gained approvals at all meetings to raise about CNY 7 billion from a private placement of additional A and H shares.

(USD 1= CNY 6.84)

Source: www.hexun.com (October 12, 2009)

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