A seesaw battle involving China Eastern Airlines can be expected in the domestic aviation industry this year, with bidders maintaining a strong interest for a stake in the Shanghai-based carrier.

 

Cathay Pacific Airways is likely to help fund any bid proposed by Air China's parent to seek a tie-up with China Eastern to maintain its stake in China's flagship carrier, Tony Tyler, the chief executive of the Hong Kong-based carrier, told the Financial Times.

 

Cathay Pacific and Air China own about 17.5 percent of each other and funding the bid can prevent dilution of its stake "if they were to issue a load of shares in order to buy China Eastern or a big chunk of China Eastern," Tyler said.

 

Tyler said Cathay Pacific and Air China are in talks to cooperate more closely, including setting up a cargo joint venture in Shanghai.

 

Meanwhile, a senior official of Temasek Holdings told the South China Morning Post that the Singapore government investment arm and Singapore Airlines remain committed to an alliance with China Eastern, even if their former deal were to face opposition from shareholders.

 

"We are firmly committed to the deal," said Ong Beng Teck, Temasek's managing director of investment.

 

They plan to work with China Eastern to win shareholders who are in favor of Air China's higher offer, but they would not give a timetable to finalize a deal, the report said.

 

China National Aviation Corp Group, Air China's parent, proposed to pay at least HK$5 a share or US$1.9 billion in total for less than 30 percent in China Eastern after majority shareholders rejected SIA and Temasek from acquiring a 24-percent stake for HK$3.80 a share.

 

CNAC said it is willing to cooperate with China Eastern to snare a dominant position in the world's second-largest aviation market even if China Eastern rejects the proposal. It will set up a joint cargo venture with China Eastern, codeshare and optimize the carrier's routes, capacity, maintenance and services.

 

However, China Eastern has said it may not respond to the proposal because it lacked legal validity.

 

(Shanghai Daily February 13, 2008)