China Eastern Airlines’ (CEA) president Cao Jinxiong said recently that government shareholders in his company and Shanghai Airlines (SA) are discussing a merger of the two carriers, the Wall Street Journal reported. He said that the government plans to inject capital into CEA before merging it with SA, at which point the combined entity would consider a possible stake sale to Singapore Airlines.

“Both [deals], with Shanghai Airlines and Singapore Airlines are possible. But for sure the merger with Shanghai Airlines will take place before a possible stake sale with Singapore Airlines,” Cao was quoted as saying. CEA last year agreed to sell a 24 per cent stake to Singapore Airlines and Temasek Holdings, but the deal fell through.

“We really missed a very good opportunity to introduce SIA as our strategic investor because we could reach three goals that way: To diversify our stakeholder makeup, enhance our management level and obtain the cash injection we need,” added CEA Board Secretary Luo Zhuping. “Our debt-toasset ratio has jumped as high as 95 per cent now,” Luo added while admitting that the industry downturn has made the pursuit of the SIA investment more difficult.