China Eastern Airlines - History and Development

History and Development

The airline was established on 25 June 1988, under the CAAC Huadong Administration. In 1997, China Eastern took over the unprofitable China General Aviation and also became the country's first airline to offer shares on the international market. It founded China Cargo Airlines in a joint venture with COSCO in 1998. In March 2001, it completed the takeover of Great Wall Airlines. China Yunnan Airlines and China Northwest Airlines merged into China Eastern Airlines in 2003.

The Chinese government has a majority ownership stake in China Eastern Airlines (61.64%), while some shares are publicly held (H shares, 32.19%); A shares, 6.17%). On April 20, 2006, the media broke the news of a possible sale of up to 20% of its stake to foreign investors, including Singapore Airlines, Emirates Airline and Japan Airlines, with Singapore Airlines confirming that negotiations were underway.

After receiving approval from the State Council of China, it was announced that on September 2, 2007, Singapore Airlines and Temasek Holdings (holding company which owns 55% of Singapore Airlines) would jointly acquire shares of China Eastern Airlines. On November 9, 2007, investors signed a final agreement to buy a combined 24% stake in China Eastern Airlines: Singapore Airlines will own 15.73% and Temasek Holdings - 8.27% stake in the airline. Singapore Airlines' pending entry into the Chinese market prompted the Hong Kong carrier Cathay Pacific to attempt to block the deal by buying a significant stake in China Eastern and voting down the deal together with Air China (which already holds an 11% stake in China Eastern) at the shareholders' meeting in December 2007. However on September 24 Cathay Pacific announced that it had abandoned such plans.

Air China's parent company, the China National Aviation Corporation, a state-owned company, announced in January 2008 that it would offer 32% more than Singapore Airlines for the 24% stake in China Eastern, potentially complicating the deal that Singapore Airlines and Temasek had proposed. However, minority shareholders declined the offer made by Singapore Airlines. It is thought that this is due to the massive effort made by Air China to buy the 24% stake.

On 11 June 2009, it was announced that China Eastern Airlines would merge with Shanghai Airlines. The merger of China Eastern and Shanghai Airlines was expected to reduce excess-competition between the two Shanghai-based carriers and to consolidate Shanghai's status as an international aviation hub. In February 2010, the merger was completed. Shanghai Airlines became a wholly owned subsidiary of China Eastern Airlines. However, Shanghai Airlines will retain its brand and livery. The new combined airline is expected to have over half of the market share in Shanghai, the financial hub of China.

In March 2012 it was announced that China Eastern was forging a strategic alliance with the Qantas Group to set up Jetstar Hong Kong, a new low cost airline to be based at Hong Kong International Airport, which will commence operations in 2013. China Eastern will hold a 50% stake in the new airline, with the Qantas Group holding the other 50%, with a total investment of US$198 million expected.