China Eastern Won't Comment on Merger Reports

SHANGHAI -- Trading in shares of China Eastern Airlines (CEA Quote) and smaller rival Shanghai Airlines was suspended Monday, though both carriers would not comment on reports they plan to merge.

China Eastern has gotten hundreds of millions of dollars in government aid as it struggles through the economic slowdown. Rumors that China Eastern might tie up with Shanghai Airlines or another competitor have been circulating for months.

"Once things are decided, we will put a company announcement on the Shanghai Stock Exchange Web site. But nothing can be said at this moment," said Zhu Yan, a China Eastern spokesman. Calls to Shanghai-based China Eastern's board secretary, Luo Zhuping, rang unanswered.

China Eastern's shares were suspended from trading in both Shanghai and Hong Kong. Shanghai Airlines' Shanghai-traded shares were also suspended.

But Wang Wanlong, a Shanghai Airlines spokesman also would not comment.

"I know nothing," Wang said.

Reports by Hong Kong's South China Morning Post and other newspapers said China's civil aviation administration had ordered the two airlines to merge.

Like many carriers, both China Eastern and Shanghai Airlines reported losses last year and were already facing troubles before the worst repercussions of the global financial crisis hit China's economy.

Merging the two carriers would reportedly give them more than half the local market, which is also shared with China Airlines, China Southern Airlines (ZNH Quote) and other regional carriers.

Shanghai, China's financial capital, is a key market and the city's plans to host the 2010 World Expo next year is seen as an opportunity for the carriers to boost their profile and business.