SHANGHAI – Air China, the world’s second most valuable airline, may face tougher domestic competition after failing to win a partner in Shanghai, the country’s commercial capital.
China Eastern Airlines and Shanghai Airlines, the dominant carriers in the city, plan to merge, and together they will control about 50 percent of the flights in and out of the city compared with 11 percent for Beijing-based Air China, Citigroup analyst Ally Ma told Bloomberg.
“There’s no chance for Air China to reverse the decision that will cost it the market share it’s been longing for,†said Ma.
“China Eastern and Shanghai Air will gain more power in setting prices and arranging routes after the merger.â€
The government approved a deal after bailing out China Eastern and Shanghai Air, which had combined record losses of US$2.4 billion last year.
The combined group of China Eastern and Shanghai Air would have 306 planes and more than 600 routes.
Air China and affiliate Cathay Pacific sought a tie-up with Shanghai-based China Eastern last year to dominate the world’s second-largest aviation market.
The merger may also lead to the revival of the stymied deal between China Eastern and Singapore Airlines, said Kelvin Lau at Daiwa Institute of Research Ltd.
“China Eastern won’t give up its efforts to introduce an overseas partner, while Singapore Air won’t give up interest in China market,†said Lau.
“That could be something to expect for the long term.â€
Source: Bloomberg
