China Eastern Airlines (CEA) has softened its stance on the impossibility of considering a bid from Air China's parent company for partnership with the country's flagship carrier.

 

CEA said on Monday that it would "seriously consider" the bid from China National Aviation Holding Company (CNAHC), the Beijing News reported on Tuesday.

 

A source with the board of CEA's listing arm told Xinhua on Tuesday that CEA "is willing to study any sincere bid that conforms to legal procedures and is better than Singapore Airline's offer".

 

Industry observers here said a "price war" between CNAHC and Singapore Airlines (SIA) was likely.

 

On Jan. 8, CEA said it would not merge with, or become a strategic partner of Air China despite its failure to secure shareholder support for a proposed sale of a 24-percent stake to SIA and Lentor Investment Pte Ltd., a wholly owned subsidiary of Singapore government investment company Temasek, at 3.8 HK dollars (52 U.S. cents) per share.

 

Many believed the failure was because the offer was too low.

 

On Jan. 6, CNAHC, which already owns 12.07 percent of CEA, announced that it was willing to make a higher offer of five HK dollars per share.

 

"CEA keeps exchanging views with SIA every day," Luo Zhuping, secretary to the CEA chairman, was quoted as saying by the Beijing News.

 

According to the newspaper, SIA sources had said it would not raise the offer, but stressed that it would continue to pursue establishing a relationship with CEA.

 

Luo said CNAHC's announcement was raising market expectations over the price of CEA's secondary public offering, adding the Shanghai-based airline would be waiting for CNAHC to advance a detailed offer.

 

A CNAHC source said on condition of anonymity that the company would put forward a new offer in one week.

 

Luo declined to comment on the possibility for a "price war".

 

Observers said Air China would try desperately to gain an advantage in an important international aviation hub like Shanghai.

 

CEA accounts for 35 percent of the aviation market in Shanghai, followed by Shanghai Airlines (18 percent) and Air China (12 percent).

 

But Air China's market share was widely expected to soar to 50 percent if it succeeded in merging with CEA.

 

(Xinhua News Agency January 15, 2008)