Air China may seek other allies to exploit Shanghai as an international hub if its preferred partner, China Eastern Airlines Corp, won't sell a stake to Air China's parent.
Air China would consider tying up with China Eastern's hometown rival, Shanghai Airlines, or Hong Kong-based Cathay Pacific Airways, with which Air China has significant cross-shareholdings.
Air China plans to set up a subsidiary airline in Shanghai, China's commercial centre, whether or not it finds a partner, Kong Dong, the company's acting chairman, said.
Air China, based in Beijing, is the strongest and most profitable of China's airlines and dreams of becoming a national supercarrier. This ambition threatens the current structure of China's airline industry, which is dominated by three large state-run carriers ¨C Air China, China Eastern and China Southern Airlines. The ultimate shape of the Chinese industry is important to the airlines and aircraft makers alike, with commercial aviation in China expanding faster than in any other major market in the world.
Air China's parent, China National Aviation Co (CNAC), won't reduce its offer price of at least HK$5 a share for up to 30 percent of China Eastern, even after a recent slide in the Shanghai carrier's share price, Kong said.
By launching its offer, CNAC had scuttled an earlier deal that would have given Singapore Airlines and its parent company, Temasek Holdings, a 24 percent share in China Eastern. The Singapore companies had offered HK$3.80 a share for China Eastern, but that carrier's minority shareholders in January rejected the proposed HK$7.2 billion offer.
China Eastern's shares closed two percent higher yesterday in Hong Kong at HK$3.54 apiece.
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