Wednesday, December 26, 2007

Is the Singapore Airlines deal set to collapse?

Li Fenghua, Chairman of China Eastern Airlines, the nation's third-largest airline, comments on its share price and the possibility of minority shareholders voting against a deal with Singapore Airlines. China Eastern plans to sell a 24 percent stake to Singapore Airlines and parent Temasek Holdings, pending an approval of minority shareholders including Air China’s parent. The parent of Air China, a larger rival of the Shanghai-based China Eastern, may consider voting against the deal on Jan. 8 with a 10 percent stake in the company.

On Air China's possible bid: “I understand some company is trying to keep its own monopoly in the market and cause some misunderstanding in media and public. It's not practical to raise the so-called bidding plan without government approval first. Plan with details is surely different from illusion. “The deal with Singapore Airlines and the government is fair and I believe our brother company won't vote against it for the interest of the industry. The government will have control on Air China's move finally. Air China parent will vote for the plan.”

On share price: “I'm confident that our shares will catch up with those of Air China and China Southern Airlines after the capital injection helps improve our business. If the deal fails to get minority shareholder's approval, short-term investors will surely lose, as we need even longer time to go through all these procedures once again.” On consolidation of China's Big Three airlines: “For a certain period of time, the government would like to see the Big Three operate in the nation's three aviation hubs. Cooperation and competition should exist for healthy development of the industry and customers.”

Will there be repercussions for Air China in their possible bid?