China Eastern shares surge on renewed merger hopes - share price wrap

China Eastern Airlines shares surged 6.9% in Hong Kong yesterday (going against the 3.4% drop in the Hang Seng Index) on reports it may offload stakes in smaller regional carriers and on renewed speculation it may merge with Shanghai Airlines (+2.3%). China Eastern is also hoping to defer orders for 15 of 29 aircraft scheduled for delivery this year (though it may find this to be a costly exercise).

Counterparts, Air China (-8.1%) and China Southern Airlines (-2.3%) fell after the government scrapped domestic jet fuel surcharges. Investors are sceptical the reductions will boost demand enough to offset the decrease in revenue. Citigroup estimates China's airlines incurred losses of USD2.9 billion in 2008 - around three times the CAAC's prediction.

Elsewhere in the region, Qantas (-7.1%) and Virgin Blue (-5.6%) were hit by recession fears in Australia.

Asia Pacific selected airlines daily share price movements (% change): 15-Jan-09