Air China Ltd's parent yesterday said an offer by Singapore Airlines Ltd for a stake in China Eastern Airlines Corp did not reflect fair value and asked both parties to renew talks.

The proposed sale price of HK$3.8 per share "does not reflect the fair value of China Eastern Airlines," Air China's parent, China National Aviation Holding Co, said in a statement e-mailed by its media representative, Wonderful Sky Financial Group Ltd.

Opposition by China National Aviation, which holds about 10 percent of China Eastern's minority shareholders, may scuttle the HK$7.2 billion (US$918 million) sale, which needs approval from two-thirds of the minority shareholders to pass on January 8.

SIA and parent Temasek Holdings Pte are seeking to buy 24 percent of China Eastern to expand in China's growing aviation market.

Under the plan, China Eastern's parent company would also invest HK$4.2 billion to maintain its majority, Bloomberg News said.

China National Aviation said in the statement that some of the proposed terms required amendment before the plan was acceptable.

Unequal treatment

"Anti-dilution rights that China Eastern Airlines has agreed to grant to Singapore Airlines and Temasek and the non-competition clause in the investor subscription agreement fails to treat other shareholders of China Eastern Airlines equally and is unfair to the domestic and international investors," the statement said.

The clause may "also place a potential obstacle to the future development of the domestic airlines industry as a whole," the statement said. China Eastern should conduct further discussions with its Singapore partners to amend the plan to one which was acceptable to China National Aviation, it added.

'Super carrier'

China National Aviation Chairman Li Jiaxiang, a former air force general who turned Air China into the world's biggest airline by market value, aims to build a domestic "super carrier" to provide stable earnings as it competes internationally with SIA and Japan Airlines Corp.

A tie-up with China Eastern would give Air China a base in Shanghai, China's commercial capital, and would enable it to dominate the world's fastest-growing air market.

(Shanghai Daily January 2, 2008)