Singapore Air to buy stake in China Eastern Airlines on 2 September
28 August 2007
Singapore Airlines will buy around a 24 per cent stake for $930 million in China Eastern Airlines Corporation, gaining greater access to a market that is forecast to grow fivefold by 2025. The stake will be split between Singapore Airlines and parent Temasek Holdings. The agreement will be signed on 2 September, the Chinese carrier's officials confirmed, while declining to confirm the size of the stake.
The tie-up will help Singapore Airlines challenge Cathay Pacific and Air China in the world's second- biggest aviation market. China Eastern was the nation's only listed carrier to post a loss last year. China's airlines are likely to carry 185 million passengers this year, 16 per cent more than in 2006.
Airlines in the world's fastest-growing economy will boost capacity by an average of 8.1 per cent a year over the next two decades, making it the fastest-growing region worldwide, according to estimates by Boeing. Singapore Airline's first-quarter profit fell 26 per cent as a one-time gain last year masked contributions from higher passenger traffic.
Cathay Pacific shares have risen 10 per cent so far this year, outperforming a 4.6 per cent gain by Singapore Airlines. Cathay added 21 routes in China with the purchase of Hong Kong Dragon Airlines last year. That helped increase its first half profit by 55 per cent.