Singapore Air may acquire 24 per cent in China Eastern Airlines

28 May 2007

Singapore Airlines would invest about $600 million and Temasek about $330 million for the combined 24 per cent stake, the sources said.

A deal would give Singapore Airlines, Asia's most profitable carrier, increased access to a market forecast to grow fivefold by 2025.

Singapore Airlines, which made a record S$2.12 billion ($1.4 billion) profit last fiscal, would be able to build on its 104 flights a week to Chinese cities, including Beijing and Shanghai. It would also complement the carrier's cargo operations.

For China Eastern, China's only listed carrier to make a loss last year, it may reduce debt and offer a partner to help fend off competition from Cathay Pacific Airways Ltd. and Air China Ltd. in Shanghai, its home market.

A stake in China Eastern may help Singapore Airlines compete with Cathay Pacific in the north Asian market. The carrier may also be able to access new routes into China, the world's second-largest aviation market.

Cathay Pacific, Hong Kong's largest airline, holds a 17.5 per cent stake in Air China, the nation's biggest international carrier. Air China also indirectly controls a similar stake in Cathay Pacific.