Cathay Pacific, Air China drop China Eastern bid

Cathay Pacific, Air China drop China Eastern bid Cathay Pacific and Air China have dropped a bid to buy China Eastern Airlines, the Hong Kong-based airline said in a statement Monday.
   Reasons for the dropped bid were not explained in a letter to the Hong Kong Stock Exchange saying that Cathay has pulled out of the race to acquire a stake in China Eastern.
   Cathay was putting together a rival bid for China Eastern after Singapore Airlines and the Singapore government's investment company, Temasek, offered $926 million for 24 percent control of China Eastern. Cathay's bid was expected to best the one of Singapore before it was dropped.
   The share price of China Eastern, which has been losing money in recent years amidst intense competition in the Chinese aviation sector, has risen 51 percent on the Hong Kong Stock Exchange in the last week over speculation about who will eventually claim a stake in the airline.
   A report in the International Herald Tribune Tuesday said that it's possible officials in Beijing have scuppered the deal over concerns of too much consolidation within China's aviation sector. The central government has managed the consolidation of China's medium-size carriers into three big carriers: Air China, China Eastern and China Southern.
   'Analysts said China Eastern had been hamstrung in competing against better-performing carriers for a share of China’s international traffic because it was carrying a huge debt burden,' the IHT story said. ' 'China Eastern’s situation is pretty bleak,' said Martin Craigs, president of Aerospace Forum Asia. 'Buying China Eastern is not about just buying shares. You have to recapitalize it, which is going to require about $1 billion on top of the purchase price.' '