China Eastern Airlines Corp Ltd receives a new A330 aircraft in Shanghai.(Photo/Xinhua)
Shares of China Eastern Airlines Corp Ltd tumbled 5.29 percent in Shanghai on Friday to close the week at 6.27 yuan (96 cents) per share despite a partnership agreement announced a day earlier with the online travel giant Ctrip.com International Ltd.
Under the deal, Ctrip pledged to purchase 3 billion yuan worth of China Eastern's A shares.
Investors have turned a cold shoulder to the deal, but the Shanghai Composite Index went up 0.22 percent to close at 2,959.24 points on Friday.
China Eastern's Shanghai stock performance was in sharp contrast to other markets. Its shares soared 3.43 percent to end Thursday trading $30.72 apiece in New York while in Hong Kong, the share climbed 0.44 percent to close at HK$4.59 (59 cents).
"The opposite market responses have reflected different investor attitudes toward the news," said Yu Nan, an industrial analyst from Haitong Securities Co.
According to Yu, investors in Hong Kong and the United States showed their spontaneous reaction to the collaboration, as the cooperation is positive to the growth of the company, but investors on the Chinese mainland may set their eyes on the long-term prospect of the decision.
"The bullish Hong Kong and New York stock markets against the weaker Shanghai Composite Index may also answer the different results," said Yu.
According to the agreement, China Eastern Air Holding Co, the parent company of listed China Eastern, and Ctrip agreed to explore cooperation in the fields ranging from tourism products, low-cost aviation, IT, e-commerce, to equity and capital market.
In addition to executing subscription of 3 billion yuan worth of shares issued under a private placement by China Eastern, Ctrip would like to increase its stake in China Eastern to 10 percent, according to Liang Jianzhang, Ctrip's cofounder, chairman and CEO.
China Eastern has been actively seeking collaboration with both domestic and international partners in the past months to strengthen its competitiveness.
In July 2015, it inked an agreement with Delta Air Lines to sell its 10 percent H shares to the US carrier, with a value of $450 million.
"We already have an observer from Delta, and Ctrip will be entitled to appoint a director at China Eastern's board of directors and participate in the decision-making once its stake reaches 10 percent. We expect their participation will effectively enhance China Eastern's management in their specialties," said Ma Xulun, president of China Eastern.
After this additional share issuance, China Eastern Air Holding will have its stake in the listed company cut to 52 percent from the current 62 percent, according to Ma.
The nation's three major airlines, or Air China Ltd, China Eastern Airlines and China Southern Airlines Co Ltd reported a combined net profit of more than 15.1 billion in 2015 thanks mostly to the cheaper fuel.
