Delta acquires China Eastern share, eyeing bigger market

(WCT) Delta Air Lines and China Eastern Airlines have reached a deal in which the former has acquired about 10% of China latter's H-shares–shares listed in Hong Kong.

China Eastern, which attempted but failed to find a strategic investor in 2008, has reactivated its bid and has found a partner, Shanghai's China Business News reported.

Delta Air Lines will become a top foreign shareholder of China Eastern. Both sides are eyeing the potential international market, especially the ever-lucrative China-US market, the newspaper said.

Delta has invested about US$450 million in the deal, the largest foreign investment in the carrier's history.

Delta, one of the top three airlines in the United States, previously bought a 49% stake in Virgin Atlantic at a cost of US$360 million.

"The agreement with Delta is a major strategic measure in China Eastern's move to carry out reforms and explore and develop a mixed-ownership economy, while driving the airline's global development," said China Eastern chair Liu Shaoyong.

With the investment, Delta will also gain an observer's seat on the board of directors of the state-owned airline, China Eastern said.

Thanks to current low fuel prices, as well as improvements in international air routes, carriers have made big profits this year, so questions have been asked about why China Eastern is bringing in new investors now. One source told the paper that it is a strategic investment, not a financial one, and that China Eastern is eyeing the international brand image and operation experience of Delta.

For Delta, the focus is on the Chinese market, which has the world's biggest potential for growth.

Delta net profits in the second quarter of 2015 reached US$1.5 billion, a whopping growth of 85% over the same period of last year.

Delta has in the past focused on the transatlantic market between Europe and the United States, but over the past two years, the Pacific market has become more popular.

Source: Want China Times

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