China Eastern Airlines, Shanghai Airlines merge to form New China Eastern Airline

China Eastern Airlines, the second biggest airline in China by fleet-size, and Shanghai Airlines have merged.

In the history of the civil aviation of China, this is the first merger involving two listed companies.

The new, combined airline – named the New China Eastern Airlines – is expected to have over half of the market share in Shanghai, the financial hub of China.

Prior to the merge, China Eastern Airlines and Shanghai Airlines, both based in Shanghai, China, were close competitors in the air travel market of Shanghai.

The Shanghai Pudong International Airport is the main hub of both airlines.

China Eastern Airlines and Shanghai Airlines, which operate domestic and international services, had reported large-scale losses in the first quarter of 2009.

It was in July 2009 that China Eastern Airlines disclosed its plan for merger with Shanghai Airlines, by announcing that it will exchange 1.3 of its Shanghai-listed A-shares for each share of Shanghai Airlines. Later, the shareholders of both companies voted in favour of the merger plan.

To start with, the two companies will jointly conduct airline arrangement, marketing management, control of operations, pricing of classes, ground service, aircraft maintenance, and handling of freight.

As for top-level personnel, Ma Xulun, general manager of China Eastern Airlines, and Tang Bing, vice-general manager of China Eastern Airlines, have been nominated as chairman and general manager, respectively, of Shanghai Airlines.

In a statement, Liu Jiangbo, deputy general manager of China Eastern Airlines Group, said that, in the past, China Eastern Airlines and Shanghai Airlines had to buy their own equipment and employ their own staff, which was a huge waste. With the merger, the two companies can save about 100 million yuan on aircraft maintenance, and the net profits are expected to go up by nearly 1.5 billion yuan.

The two airlines have now done, Liu Jiangbo added, something that would have been once “inconceivable.”

According to China Eastern Airlines, the merger gives more convenience to passengers in Shanghai. For example, if a passenger misses a flight of China Eastern Airlines, he can board a flight of Shanghai Airlines, which will take off half an hour later.

The new, combined airline company has a fleet of 331 mid-sized aircraft, the second largest fleet after China Southern Airlines; assets worth over 150 billion yuan, as well as 151 flight destinations.

China Eastern Airlines has already launched flights to major cities in the world like Los Angeles, New York, Frankfurt and Paris – thus becoming one of the biggest carriers in the world regarding overall size.

The merger, in the opinion of aviation analysts, has given China Eastern Airlines ample confidence to step up its presence in northern China. The combined company is scheduling news flights in order to increase its market share in Beijing – a city that has been traditionally dominated by China Southern Airlines and Air China.

Also, the merger of Shanghai Airlines with China Eastern Airlines may help encourage consolidation of the regional aviation industry in Shanghai, according to analysts.