Shanghai Airlines Co Ltd said on Thursday it has agreed to terminate its Star Alliance membership by the end of October.

The city-based carrier to merge with China Eastern Airlines Co Ltd - a SkyTeam Alliance member - in February this year.

Shanghai Airlines said it will continue to offer all Star Alliance customer benefits and its passengers will enjoy their worldwide alliance benefits until October 31, 2010.

These include, for example, the collection and redemption of miles, participation in various Star Alliance fare products, and the provision of extra benefits to Star Alliance Gold and Silver customers, Xia Benjia, a Shanghai Airlines official, told China Daily.

"The termination of the membership is a formality after China Eastern and Shanghai Airlines combined to become a single carrier," said Luo Zhuping, board secretary of China Eastern.

"China Eastern signed a memorandum of understanding to join the SkyTeam global airline alliance in June. Therefore, Shanghai Airlines has to quit its former alliance to follow China Eastern," Luo said. Members of the same airline alliance can share assets such as sales offices, maintenance and operational facilities, bringing cost reductions.

A shift from Star Alliance to SkyTeam Alliance will not bring about many changes for Shanghai Airlines, as the three global alliances - Star Alliance, SkyTeam Alliance and Oneworld - have similar requirements for facilities in line with global standards, said Li Lei, an analyst from CITIC China Securities.

Analysts said Shanghai Airlines' decision to quit Star Alliance is just part of the two Shanghai carriers' merger and ongoing restructuring.

China Eastern and Shanghai Airlines have undergone major restructuring since the merger plan was announced last July. Shanghai Airlines permanently suspended its trading on January 25 after eight years on the Shanghai Stock Exchange, and settled its share price at 7.27 yuan.

China Eastern said in a statement to the Shanghai Stock Exchange on Thursday that its parent company, China Eastern Air Holding Company, will purchase Shanghai Airlines' subsidiaries - an in-flight catering company, an international travel agency and a trading company - to further integrate the two carriers' minor businesses.

The combination of the businesses will help the new China Eastern set a uniform standard for purchasing aircraft, food and equipment.

"A larger and more uniform order will not only save costs, but also result in greater efficiency," said Xu Xiang, an industrial analyst with Northeast Securities.

The two carriers' cargo businesses are also undergoing restructuring, according to Luo.

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