Singapore Airlines is to have management role in China Eastern after taking a 15.7% stake in the carrier
SIA and Singapore government investment arm Temasek Holdings agreed early in September to acquire a combined 24% of Shanghai-based China Eastern for HK$7.15 billion ($916 million).
SIA will pay nearly HK$4.7 billion for 15.7% while Temasek will acquire 8.3% for nearly HK$2.5 billion. The deal still requires shareholder approvals.
The deal had been under discussion for some time and for China Eastern it is intended in part to ease shareholder concerns that it has not acted quickly enough to restructure its operations. China Eastern is the only one of the "big three" Chinese carriers to have posted a loss in the first half and the only one not to have committed to joining a multilateral alliance. Its share price soared in Hong Kong trading a day after the deal was confirmed.
SIA, which has long been seeking to expand its reach in China, says it will be able to nominate two representatives to the China Eastern board, while a board finance committee will be established which will include representation from SIA. China Eastern will also be sending executives to Singapore for "attachments and training programmes", while SIA will be "seconding management executives to key positions" in China Eastern. "These proposed management exchanges will enable both organisations to share proven practices and establish closer co-operation," says SIA.
It also says they plan to look at ways to link schedules and "will consider jointly any question of CEA joining a global alliance". Oneworld has been courting China Eastern and says SIA's involvement should not complicate negotiations. Air China has already committed to join Star and China Southern SkyTeam.
China Southern is now the only one of the "big three" not to have equity ties with another airline, as Air China is already 17.5%-owned by Hong Kong's Cathay Pacific Airways. China Southern has, however, been in talks with Air France-KLM on the establishment of a joint-venture cargo airline.
Source: Airline Business
