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China Eastern Airlines said it had received a proposal for a "strategic partnership" with Air China that could bring it a cash injection of US$1.9 billion ($2.5 billion) and involve a tie-up between many of the airlines' operations.
But China Eastern Airline said it "doubted the sincerity" of the offer from Air China, renewing hostility to a deal with its larger rival.
"It's informal and doesn't conform to legal procedures," a China Eastern representative said.
The parent group of Air China, China National Aviation Corp (CNAC), proposed that it and China Eastern's own parent group buy a placement of 2.98 billion new Hong Kong-listed H shares in China Eastern, the statement said.
The shares would be bought for no less than HK$5 (84c) each, compared to China Eastern's last traded price in Hong Kong of HK$6.75. CNAC, which already owns 3.9 per cent of China Eastern, would end up with a stake of just under 30 per cent.
The share issue would inject at least HK$14.9 billion of cash into China Eastern, reducing its debt-to-asset ratio from 94.33 per cent to 77 per cent, China Eastern quoted CNAC's proposal as saying.
CNAC also proposed that, regardless of whether or when its equity investment went ahead, Beijing-based Air China help Shanghai-based China Eastern form an "operations hub" in Shanghai to strengthen the use of its route network and other resources.
The two airlines would consolidate cargo operations in a joint venture, and co-operate in areas such as sharing flights, frequent flyer programmes, maintenance and ground service.
A combination with China Eastern would give Air China the world's largest airline by market value and a dominant position in the world's second-largest aviation market.
"We believe fully carrying out this proposal would bring concrete co-operative benefits to both sides, while benefiting shareholders, the companies, employees and society," CNAC said.
- REUTERS
