Merger boosts hub airline goal

2007-12-27 17:59:33 Xinhua English

BEIJING, Dec. 28 -- The partnership between China Eastern Airlines and Singapore Airlines will provide necessary financial resources and management expertise to help the Chinese firm achieve the goal of becoming a hub airline company based in Shanghai, China Eastern's President and Chairman Li Fenghua said Thursday.

Li told China Daily the share sale to the Singaporean company will provide the sorely needed funding to establish the mainland's third largest carrier as a credible hub airline in Shanghai.

Currently the Chinese airline lacks management expertise and is weak in product design, which give rise to losses in many of its international flights. It loses 1 million yuan on each flight bound for the United States and 3 million yuan for each bound for South Africa because of low occupancy rate.

"The cooperation with Singapore Airlines will bring about a better administrative structure to our board of directors," Li said.

"Singapore Airlines has established the island nation as an international airline hub. As an international hub airline company, Singapore Airlines integrated all its resources and developed a series of products on the back of its own advantages, which could help us in such areas as flight connection and airline network structure."

China Eastern's partnership with the two foreign companies, to be voted on by shareholders on January 8, has encountered potential obstruction from its largest domestic competitor Air China and its parent China National Aviation Holding Co, which holds 12.07 percent of China Eastern's H shares.

Though Shanghai-based China Eastern is confident Air China, also controlled by the State-owned Assets Supervision and Administration Commission, will eventually approve the deal, it is concerned that minor shareholders, influenced by Air China's stance, will turn down the deal.

"It's possible that enough minor shareholders will veto the deal despite a green light from Air China," Luo Zhuping, board secretary of China Eastern Airlines, said yesterday.

He has been on frequent roadshows at home and abroad trying to persuade as many small shareholders as possible.

"The partnership with Singapore Airlines will help us resolve financial difficulties, improve management structure and product design," he said. "The goals will be empty talk if we are not well funded."

With stronger financial support, the company will improve customer services at both airports and on board. "We can enhance the chairs, facility, layout and even newspapers at our international flights."

A stronger China Eastern will also help to establish its home base as an international airline hub.

(Source: China Daily)