www.chinaview.cn 2009-06-11 21:33:22

BEIJING, June 11 -- A spokesman for China Eastern Airlines, a leading carrier, has confirmed that it plans to merge with smaller rival Shanghai Airlines.

"Starting June 8, China Eastern and Shanghai Airlines officially began their restructuring procedures," Liu Jiang Bo, a China Eastern spokesman told Xinhua Tuesday. But he declined to provide further details.

Soundbite: Jia Yuankun, Xinhua correspondent: "Since last year, the global financial crisis has swept through many industries, especially the airline industry, which struggled through the toughest days in 20 years. Rumors about the merger of China Eastern and Shanghai airlines circulated for months. Why did it happen now? It was forced by market conditions. Amid an ailing industry, companies would sidestep traditional competition to merge and reconstruct."

Jia said the merger could optimize the fragmented market.

Soundbite: Jia Yuankun, Xinhua correspondent "At present, China Eastern has 200 planes while Shanghai airlines owns 66. The former ranks third after Air China and China Southern airlines. But after the re-shuffle, the new China Eastern will take over the runner-up and break up the old pattern of domestic aviation."

Jia said the merger would give the new group a 50-percent market share in Shanghai, headquarters for the two carriers. The combined carrier could be more competitive against its major rivals, Air China and China Southern Airlines.

Soundbite: Jia Yuankun, Xinhua correspondent "Generally speaking, an international hub is home to its own super-scale airlines. For example, the Charles de Gaulle Airport in France has Air France while Changi Airport in Singapore is the base to Singapore Airlines. But Shanghai doesn't have a super-scale base company and China Eastern has less than 50 percent of the market. Transshipment is the core of international hub airports. After the merger, which will mean more than half of the market share, we'll see unified airlines at Shanghai. This is a big step for Shanghai's airports, which want to be international hubs."

Analysts said that merely combining market shares was not a guarantee of success. Rather, efficiency during the reshuffle would be key.

Xinhua News Agency correpondents reporting from Shanghai. (XHTV)