China Eastern-Shanghai Airlines Merger
Airlines to merge by the end of the year
China Eastern Airlines, the country's third biggest carrier, said yesterday that it would complete its merger transaction with Shanghai Airlines by the end of the year.
"All the legal procedures will be completed by the end of 2009," said Ma Xulun, general manager of China Eastern.
The Shanghai-based carrier said in July it would buy smaller rival Shanghai Airlines via a 9-billion-yuan share swap that would give it a market share of over 50 percent in China's financial hub.
Ma said China Eastern is expected to return to the black in 2010 after a huge reduction in losses this year. The airline made a net profit of 1.2 billion yuan in the first nine months of this year.
China Eastern yesterday also inked a partnership deal with Chinese e-commerce portal Alibaba Group to include more Web-based applications in its routine operations.
The airline has set up a ticket-selling platform on Taobao.com, China's largest online shopping portal under Alibaba. Alipay, another subsidiary of Alibaba, will provide online payment services for customers who buy tickets from China Eastern's website.
Earlier this month, China Eastern established a similar selling platform with Tenpay.com, the payment arm of China's Internet giant Tencent, to promote its direct ticket sales.
"We hope direct sales can account for 20 percent of our total ticket sales in five years' time," said Ma, adding that direct sales accounted for less than 5 percent of the total ticket sales currently.
Around 80 percent of Chinese airlines' ticket sales come through agents.
Direct sales can help save costs, including commissions for agents and fees for computer reservation systems (CRS), said Hu Yuanyuan, an analyst with research firm iResearch.
China Eastern spent about 1.6 billion yuan on commissions and CRS fees in 2008, which accounted for some 2.8 percent of its total operating expenses.
"Airlines can also have more control over their sales networks and better interact with customers if they bypass agents," added Hu.
More than 10 domestic airlines have started direct sales businesses through Taobao.com, including Hainan Airlines Co Ltd, the fourth largest carrier in China. Air China and China Southern Airlines are also reportedly in talks with Taobao.com to join the platform.
Besides airlines, over 100 agents too have opened online stores on Taobao.com.
According to iResearch, online ticket sales touched 49.6 billion yuan in 2008, a year-on-year increase of 440.7 percent.