(Xinhua)
Updated: 2008-01-11 10:41

China National Aviation Holding Company (CNAHC), parent of flagship carrier Air China, will seek a partnership, rather than a merger, with China Eastern Airlines (CEA) in its counter-offer for the rival carrier.

CNAHC also said it would, as promised, submit the bidding within two weeks of the rejection to CEA's proposed 24 percent stake sale to Singapore Airlines (SIA) and Lentor Investments, a unit of the Singapore state investment company Temasek.

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Minority shareholders voted against SIA's bidding on Tuesday after CNAHC's wholly-owned subsidiary, China National Aviation Corp (Group) (CNAC), said it planned to buy 24 to 30 percent of CEA's shares at HK$5 (64 US cents) apiece, 32 percent higher than SIA's offer price of HK$3.8.

The counter-offer would include terms on shareholding arrangement, business integration and the building of Shanghai's aviation hub, the Shanghai Securities News quoted an unnamed CNAHC official as saying on Thursday.

It would also reflect the long-held concept of Li Jiaxiang, former CNAHC's general manager and Air China's board chairman, for the joint running of overlapping flights, combined cargo transport subsidiaries and a cross-shareholding arrangement between the two carriers, the official stated.

The two central government-owned airlines could still maintain independent operation and their own brands, the official added.

Li, new head of the General Administration of Civil Aviation of China, the industry regulator, had been longing for an alliance with CEA to gain more access to the Shanghai market, a move aimed at building Air China into a "super carrier" to better vie with foreign rivals for larger market share.

CEA had a dominant 36 percent share of Shanghai's aviation market, compared with 12 percent of the Beijing-based Air China.

Compared with SIA's bid, Air China's tie-up plan could better help the two major airlines boost efficiency by jointly arranging flights, many of which overlapped, and to improve the competitive edge of the nation's aviation industry, said Li Lei, analyst with China Securities.

Hong Kong leading carrier, Cathay Pacific, may not take CEA stake with the counter-offer. But the possibility of its involvement in the business integration and management could not be ruled out, an unnamed CNAHC official said.

Cathay Pacific, which had a 17.5 percent stake swap with Air China, could provide the management expertise CEA wanted from its planned strategic alliance with SIA, said Li Lei.

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