Air China to make a more broad-based offer to China Eastern

Air China parent, China National Aviation Corp (CNAC), is likely to propose a comprehensive alliance with China Eastern Airlines (CEA), including code-sharing, a cargo joint venture and equity swap, according to CNAC officials.

According to a senior CNAC official, a share swap between flag carrier Air China and China Eastern would be a more preferable option for CEA than a mere purchase of a stake by CNAC. The official is quoted as saying that China Eastern would remain an independent legal entity and that a stake purchase by CNAC did not necessarily mean that CEA would be swallowed up by Air China.

Soothing noises, such as these, being made by CNAC officials maybe a result of the fierce determination of CEA to resist all moves by CNAC to absorb this Shanghai-based carrier, China's third largest.

Early on in the week, China Eastern's minority shareholders overwhelmingly rejected its proposal to sell a 24 per cent stake to Singapore Airlines and Singapore state investment agency Temasek for $920 million. Far from giving up on the deal, the CEA chairman affirmed his determination to see the tie-up with Singapore Airlines through. He stated emphatically that he was not interested in any tie-up with Air China.

CNAC has already said that it would, within two weeks, submit a bid for a China Eastern stake that would be priced at least 32 per cent higher.

The CNAC official apart from confirming that a proposal would be submitted in two weeks, stressed that the plan would be more broad-based in nature than a mere purchase of stake in China Eastern.