Singapore Airlines buys stake in lagging China Eastern

Singapore Airlines and Temasek Holdings will buy a combined 24% in China Eastern Airlines, a deal that is expected give Singapore Airlines a foothold in China's expanding passenger aviation market

Singapore Airlines and Temasek Holdings, the nation's investment firm, will purchase nearly 1.9 billion new shares from the struggling Chinese airline for a reported US$923 million, the firms said on Sunday.

The Singaporean national carrier, majority-owned by Temasek, will buy 1.24 billion shares for a 15.7% stake while Temasek will purchase 649 million shares for 8.3% share, the firms told reporters in Shanghai.

For Singapore Airlines, the deal cements a foothold in China's expanding passenger aviation market, especially as China is expected to dominate Asian aviation and later, global aviation, the Centre for Asia-Pacific Aviation predicted.

Meanwhile, China Eastern plans to leverage Singapore Airline's strong branding to lift its own, as well as update the company's fleet, facilities and operations, Li Fenghua, president of China Eastern told reporters.

The airline currently lags behind rivals Air China and China Southern Airlines, but all three have not been spared soaring jet fuel prices and intensifying competition. China Eastern reported net losses in 2005 and 2006, but hopes the deal will help improve the carrier's debt structure and reduce financing costs.