Cathay dodges battle with Singapore Airlines for China Eastern

HONG KONG's Cathay Pacific has ended speculation that it would attempt to block a move by Singapore Airlines to buy a stake in mainland carrier, China Eastern Airlines, which analysts had expected to be a fierce contest.

There had been much speculation that Cathay Pacific together with ally China National Aviation Holdings, the parent of Hong Kong-listed Air China with whom Cathay Pacific has a cross-shareholding arrangement, were trying to derail the deal.

"The acquisition would have replaced that previously proposed by Singapore Airlines Limited and a subsidiary of Temasek Holdings (Private) Limited," Cathay Pacific said a statement filed with the Hong Kong Stock Exchange on Monday.

Cathay was said to be seeking a stake in China Eastern Airlines as Air China already holds an 11 per cent equity interest in the Shanghai-based carrier, and together they may have been able to thwart rival Singapore Airlines' bid.

Cathay Pacific and Air China own 17.5 per cent of each other's shares. Cathay Pacific and Air China shares were suspended from trading in Hong Kong on Monday, but resume trading today, reports The Wall Street Journal.

Singapore Airlines agreed early this month to buy a 15.7 per cent stake in China Eastern, while its parent, Temasek Holding, would simultaneously buy an additional 8.3 per cent interest in China Eastern. Their combined offer of HK$7.2 billion (US$925 million) has been approved by China's cabinet and China Eastern's management board, the report said, paving the way for the deal to proceed.