Airline merger rumors heat up

SHANGHAI: When it comes to China Eastern, the Shanghai-based airline that frequent flyers and investors love to scorn, the stock market rumor mill seldom takes a rest.

Each time the State-owned company, listed on both the Shanghai and Hong Kong stock exchanges, discloses any news that's less than positive, the market buzzes with talk of its impending shotgun marriage to smaller Shanghai Airlines. Such a marriage seems to make obvious sense to outsiders because it could produce an airline capable of achieving much-coveted domination of the Shanghai air traffic hub.

The rumor mills were churning at a feverish speed last month after China Eastern disclosed potential large losses in fuel contracts, prompting the Shanghai State-owned Assets Supervision and Administration Commission (SSASAC), which owns Shanghai Airlines, to deny any merger talks with China Eastern.