Beijing: Shares in China Eastern Airlines and Shanghai Airlines shares were suspended Monday, amid media reports that the government had ordered the two ailing carriers to merge.
The two Shanghai-based carriers’s shares were suspended pending an announcement on “important issues,” according to a statement posted on the Shanghai stock exchange’s website.
“We received instructions from the government Saturday about the consolidation,” Feng Xin, vice-president of Shanghai Airlines, was quoted Monday by the Hong Kong-based South China Morning Post as saying.
The merger will give China Eastern, one of China’s three major airlines, a 50% market share in Shanghai Airlines, the report said.
China’s aviation industry is facing strong head winds amid the global economic downturn, with the three leading carriers Air China, China Southern and China Eastern losing a combined $4.3 billion last year.
China Eastern alone suffered a net loss of $2.2 billion last year due to falling passenger numbers, rising fuel costs and bad bets on fuel hedging contracts.
The government has injected nine billion yuan ($1.3 billion) into the company since late last year to help it through the hard times.
Shanghai Airlines booked a net loss of 1.3 billion yuan in 2008, after losing 479 million yuan the year before.