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Shanghai Airlines And China Eastern To Combine  
User currently offlineEddieDude From Mexico, joined Nov 2003, 7592 posts, RR: 42
Posted (5 years 4 months 2 weeks 6 days 3 hours ago) and read 5533 times:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aGL7lDVgahas

Interesting development in Chinese aviation.


Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
18 replies: All unread, jump to last
 
User currently offlineEghansen From , joined Dec 1969, posts, RR:
Reply 1, posted (5 years 4 months 2 weeks 6 days 3 hours ago) and read 5451 times:

That's interesting because Shanghai is Star Alliance and China Eastern is not. Wonder how they will resolve the membership.

User currently offlineOta1 From Germany, joined Apr 2008, 399 posts, RR: 0
Reply 2, posted (5 years 4 months 2 weeks 6 days 2 hours ago) and read 5396 times:
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Quoting Eghansen (Reply 1):
That's interesting because Shanghai is Star Alliance and China Eastern is not. Wonder how they will resolve the membership.

Pretty much the same situation that we had when HP merged with US. Leaving the alliance would create additional cost as FM would have to pay an exit fee, while MU does not have these obligations, so I expect the combined carrier to remain in *A.


User currently offlineEddieDude From Mexico, joined Nov 2003, 7592 posts, RR: 42
Reply 3, posted (5 years 4 months 2 weeks 6 days 2 hours ago) and read 5358 times:

Furthermore, Air China is a Star member. China Eastern was seen as a possible oneworld candidate. If Air China were not a Star member, it would be logical to think that the combined China Eastern - Shanghai Airlines would remain in Star, but with Air China in Star, who knows. It will be, as you say, interesting to see how this gets resolved.

On a related matter, I think SQ had been interested in acquiring a stake of China Eastern but more powerful interests prevented that from happening.

Question: Didn't CX have a stake in China Eastern?



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlineXiaotung From New Zealand, joined Jan 2006, 853 posts, RR: 0
Reply 4, posted (5 years 4 months 2 weeks 6 days 2 hours ago) and read 5353 times:



Quoting Ota1 (Reply 2):
Pretty much the same situation that we had when HP merged with US. Leaving the alliance would create additional cost as FM would have to pay an exit fee, while MU does not have these obligations, so I expect the combined carrier to remain in *A.

Only MU is much bigger than FM and it has announced intention to join SkyTeam. It will be interesting to see what's going to happen.


User currently offlineEddieDude From Mexico, joined Nov 2003, 7592 posts, RR: 42
Reply 5, posted (5 years 4 months 2 weeks 6 days 2 hours ago) and read 5314 times:



Quoting Xiaotung (Reply 4):
Only MU is much bigger than FM and it has announced intention to join SkyTeam. It will be interesting to see what's going to happen.

I do not believe MU is interested in joining SkyTeam. China Southern is already a full SkyTeam member.



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlineCloudyapple From Hong Kong, joined Jul 2005, 2454 posts, RR: 10
Reply 6, posted (5 years 4 months 2 weeks 6 days 1 hour ago) and read 5227 times:



Quoting EddieDude (Thread starter):
Shanghai Airlines And China Eastern To Combine

It's been brewing for more than a year and it's an absolute no brainer. They have already had many codeshares and the combined entity will have 50% of Shanghai and a near monopoly at Hongqiao. Would solve a few issues at Shanghai but what remains to be fixed are the regional bases which are losing money hand over fist.

Quoting EddieDude (Reply 3):
Furthermore, Air China is a Star member. China Eastern was seen as a possible oneworld candidate. If Air China were not a Star member, it would be logical to think that the combined China Eastern - Shanghai Airlines would remain in Star, but with Air China in Star, who knows. It will be, as you say, interesting to see how this gets resolved.

On a related matter, I think SQ had been interested in acquiring a stake of China Eastern but more powerful interests prevented that from happening.

Question: Didn't CX have a stake in China Eastern?

I fully expect in a few years' time you will have a Skyteam hub at Guangzhou, a Star Alliance hub at Shanghai and oneworld hubs at Hong Kong and Beijing.

Cathay Pacific and Air China have cross shareholdings in each other. Air China owns 17.5% of Cathay and Cathay owns 20% of Air China.

Singapore is likely to try to lay their hands on the new China Eastern again. With the semi-protectionist approach China is taking, unless a similar deal to Cathay/Air China's is proposed it's unlikely to be approved. Ref: Collapse of Coca Cola/Huiyuan deal.



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User currently offlineFCKC From France, joined Nov 2004, 2348 posts, RR: 4
Reply 7, posted (5 years 4 months 2 weeks 5 days 16 hours ago) and read 4870 times:

As probably the name China Eastern will stay , and Shanghai Airlines will deseappear , that means we will never see an A321 in full Shanghai Airlines cs , and they will have never operated any Airbusses...Sad !

In another way we will gain another new 757 operator.These will be the first 757s in China Eastern cs.Also no ARJ21 in Shanghai cs , but only in China Eastern cs..............if this order stays !


User currently offlineLAXdude1023 From India, joined Sep 2006, 7693 posts, RR: 25
Reply 8, posted (5 years 4 months 2 weeks 5 days 16 hours ago) and read 4801 times:



Quoting EddieDude (Reply 3):



Furthermore, Air China is a Star member. China Eastern was seen as a possible oneworld candidate. If Air China were not a Star member, it would be logical to think that the combined China Eastern - Shanghai Airlines would remain in Star, but with Air China in Star, who knows. It will be, as you say, interesting to see how this gets resolved.

Very true. Its going to be interesting to see which alliance the cobined carrier will choose. I dont think necesarily that they will go with Star Alliance since MU is the much bigger carrier and since they have been flirting with both OneWorld and SkyTeam.

Quoting Cloudyapple (Reply 6):
I fully expect in a few years' time you will have a Skyteam hub at Guangzhou, a Star Alliance hub at Shanghai and oneworld hubs at Hong Kong and Beijing.

That would be cool, I would love to see Air China join OneWorld.  Smile



Stewed...Lewd...Crude...Irreverent...Belligerent
User currently offlineHuaiwei From Singapore, joined Oct 2008, 1116 posts, RR: 2
Reply 9, posted (5 years 4 months 2 weeks 5 days 15 hours ago) and read 4731 times:



Quoting Cloudyapple (Reply 6):
I fully expect in a few years' time you will have a Skyteam hub at Guangzhou, a Star Alliance hub at Shanghai and oneworld hubs at Hong Kong and Beijing.

While Guangzhou is filmly in Skyteam's hands, I am not as confident over Beijing or Shanghai. It is highly unlikely for Air China to leave *A, as I sense the Chinese authorities believe the flag carrier should be in the world's biggest alliance. Beijing cannot be considered a OneWorld hub without Air China.

Quoting Cloudyapple (Reply 6):
Singapore is likely to try to lay their hands on the new China Eastern again. With the semi-protectionist approach China is taking, unless a similar deal to Cathay/Air China's is proposed it's unlikely to be approved. Ref: Collapse of Coca Cola/Huiyuan deal.

It remains to be seen whether it will be the Chinese state pulling the plug or SQ backing away from the deal. As SQ has said many times, this is the maximum price it will pay, take it or leave it. Investing in China may be lucrative, but it also carries with it significant risks, given the state of the company's finances and the unpredictably of the authorities stand on airline mergers and such.

The Chinese authorities know that SQ is not hard up for the deal, yet should the deal collapse, it will not help investor confidence at a time when it is most needed. Allowing a CA-MU merger also creates a monopoly in China's two biggest hubs, is anti-competition, and will disrupt the nice balance now existing between the three big carriers.

SQ is no coca-cola. It is a known fact that the Chinese are less suspicious towards companies based in Chinese-majority entities outside China, or managed by ethnic Chinese. Public sentiment within China also reflects this...the idea of a western company taking over a local one is far less palatable compared to a HKer/Macanese/Taiwanese/Singaporean and to some extent, Malaysian company doing the same thing.



It's huaiwei...not huawei. I have nothing to do with the PRC! :)
User currently offlineNaritaflyer From Japan, joined Apr 2006, 549 posts, RR: 1
Reply 10, posted (5 years 4 months 2 weeks 5 days 14 hours ago) and read 4633 times:

The China Eastern and Shanghai merger has been talked about for over a year. I'll believe it when I see it.

User currently offlineOlympic472 From United States of America, joined Jun 2008, 470 posts, RR: 0
Reply 11, posted (5 years 4 months 2 weeks 5 days 14 hours ago) and read 4589 times:

If this materializes, a new name is long over-due. In my opinion neither name works.


Civil Aviation has a "Need for Speed"!
User currently offlineAstral From Canada, joined Mar 2004, 214 posts, RR: 0
Reply 12, posted (5 years 4 months 2 weeks 5 days 10 hours ago) and read 4405 times:

When dealings with State-owned entities in China, everything is POLITICAL. The SQ deal didn't go through was not based on the prices offered, but decision makers in Beijing didn't want foreign owernship with a major State-owned enterprise.
The MU and FM partnership again is the best political as well as commercially viable arrangement, so it received concession from Beijing. Both FM and MU has much political backing to consider, the final outcome would be a mutual exchange of stocks, so that both would 'own' the other. As such both MU and FM can keep their own brand, and the first thinking of branding the merged company as 'Shanghai China Eastern Airlines' (keeping the MU code only), was quitely dropped a few weeks ago. The merged company will have a new single management team at the top, while operational remains seperate. Duplicated routes will be rearranged with FM gaining more domestic access, and timetable adjusted to feed passengers to MU for international routes.
Other than bad mangement at MU, the dual airports in Shanghai (PVG & SHA) has contributed much to the high cost of operations with both MU and FM, especially with MU having to cross feed international traffic. This same double-cost was not experienced by CA in PEK or CZ at CAN, thus making MU with itself a higher higher base cost at its own base and has a smaller market share at both PVG and SHA when compared with CA at PEK and CZ at CAN.
I myself never believe any foreign company would be able to own any Chinese major State-own enterprises, simply politically unworkable at current or forseeable future. The CCP (Chinese Communist Party) which has its foot in every entities in China, cannot stand any foreigner to tell them what is better or what has gone wrong. Remember China's politics is simply CCP knows the best, and so arrangement must be made to cope with political acceptance. There are no 'wrong' decisions by CCP in China, just may be very few 'bad' decisions, thus the State kept pumping money into the 3 major airlines, allowing Hainan to gain outrages concession etc. etc.
It is too early to tell which alliance the newly merged company would join. Again politically I don't think Star Alliance would stand any chance. Being too big in China threaten others, and it is a no-go idea. CA and CX cross-own each other while both at different alliance, so the newly merged company too can be different. Air China already owned a good part of FM, and to balance the game a little, don't be surprised that FM remained a Star member while MU would join Oneworld. Future passengers at MU/FM can have the best choice in town - benifit either from Star or Oneworld !! Not bad at all.


User currently offlineEghansen From , joined Dec 1969, posts, RR:
Reply 13, posted (5 years 4 months 2 weeks 5 days 8 hours ago) and read 4321 times:



Quoting LAXdude1023 (Reply 8):
That would be cool, I would love to see Air China join OneWorld.

Why would they join OneWorld? They already belong to Star Alliance.


User currently offlineLAXdude1023 From India, joined Sep 2006, 7693 posts, RR: 25
Reply 14, posted (5 years 4 months 2 weeks 5 days 8 hours ago) and read 4310 times:



Quoting Eghansen (Reply 13):
Why would they join OneWorld? They already belong to Star Alliance.

I dont know what they will do. We have CAN as a Skyteam hub, PEK as a Star Hub, and PVG hanging in the balance with MU right now. Its entirely possible that OneWorld could be able to pull one of these airlines in their court. Also we dont know if the Chinese government will have a say since the Chinese airlines have alot of political backing. Its possible that the Chinese government might want to have hubs for all the alliances as opposed to just two in the Chinese interior.



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User currently offlineEddieDude From Mexico, joined Nov 2003, 7592 posts, RR: 42
Reply 15, posted (5 years 4 months 2 weeks 4 days 2 hours ago) and read 3581 times:

An interesting article discussing Air China's situation as a result of the merger of MU and FM:

http://www.bloomberg.com/apps/news?pid=20601109&sid=ab5JYg3692AE



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlineEddieDude From Mexico, joined Nov 2003, 7592 posts, RR: 42
Reply 16, posted (5 years 4 months 2 weeks 3 days 15 hours ago) and read 3410 times:

The plan apparently calls for FM to cease its legal existence since its assets and liabilities will be assumed by MU as a result of the merger.

http://news.xinhuanet.com/english/2009-06/10/content_11517664.htm



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User currently offlineCba From United States of America, joined Jul 2000, 4531 posts, RR: 3
Reply 17, posted (5 years 4 months 2 weeks 3 days 14 hours ago) and read 3374 times:



Quoting LAXdude1023 (Reply 14):
I dont know what they will do. We have CAN as a Skyteam hub, PEK as a Star Hub, and PVG hanging in the balance with MU right now.



Quoting EddieDude (Reply 16):
The plan apparently calls for FM to cease its legal existence since its assets and liabilities will be assumed by MU as a result of the merger.

From the Chinese government point of view, it makes the most sense to have China Eastern in OneWorld, which will be possible if FM ceases its legal existence (thus not being part of *A anymore). If the combined entity joins OneWorld, then 3 major non-HK Chinese markets will each be served by a unique alliance:

1. *A controls PEK through Air China
2. Skyteam controls CAN through China Southern
3. OneWorld controls PVG through China Eastern (and also HK through Cathay)

*A will likely fight this tooth and nail, as they will lose their presence in PVG that they get through Shanghai airlines, and thus lose all the connecting opportunities.

Quoting Huaiwei (Reply 9):
SQ is no coca-cola. It is a known fact that the Chinese are less suspicious towards companies based in Chinese-majority entities outside China, or managed by ethnic Chinese. Public sentiment within China also reflects this...the idea of a western company taking over a local one is far less palatable compared to a HKer/Macanese/Taiwanese/Singaporean and to some extent, Malaysian company doing the same thing.

The same bias seems to be true in the US as well. Imagine if a Chinese brewer tried to buy Budweiser. Americans in general seem to be less hostile to European/Canadian takeovers than to Asian ones (anybody remember unical in 2005?)


User currently offlineEddieDude From Mexico, joined Nov 2003, 7592 posts, RR: 42
Reply 18, posted (5 years 4 months 2 weeks 3 days 14 hours ago) and read 3351 times:

Yep. The CNOOC tried to buy Unocal but the U.S. government did not like this so in the end Unocal was bought by Chevron.

Also, Haier tried to buy Maytag, but Maytag was sold to Whirlpool. The only successful Chinese buyer in the U.S. recently is Lenovo who bought IBM's P.C. business.

In the meantime, with respect to SQ's interest: http://www.tradingmarkets.com/.site/news/Stock%20News/2368169/



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